Dow cools to sale of Indy ag business

December 1, 2008
Locally based Dow AgroSciences, one of Indianapolis' top employers, may not be going on the sale block after all.

Parent company Dow Chemical Co.of Midland, Mich., started the year in a frenzied hunt for cash. And the company's CEO, Andrew Liveris, acknowledged in February that it might sell the Indianapolis ag-chemicals- and-biotech company "even though we are very proud of the business."

But Dow Chemical has wiggled its way out of its cash crunch, and Liveris is signaling he's cooled to an outright sale. Analysts say Dow AgroSciences-which has $4.5 billion in annual sales and 5,400 employees (including 1,100 at its Zionsville Road headquarters)-might have fetched more than $7 billion.

"We've designed a structure where we can control our destiny, rather than be forced to fire-sale," Liveris told Reuters March 9. "More critically, we can retain key assets like Dow AgroSciences."

In a conference call with analysts the same day, Liveris was more equivocal.

"We will listen to people who want to pay a decent price for that asset, if that ever comes up, but we've always been like that. ... Right now, we don't have to sell it," he said.

In both the call and the interview, Liveris raised the prospect of retaining majority ownership but forming a partnership that helps boost the company from its fifth-place ranking among agchemical producers.

Analysts don't anticipate Dow's selling AgroSciences anytime soon-though the fact it started the process of shopping the business could kindle talks that otherwise wouldn't have occurred. Last month, Switzerland-based Sygenta, Dow AgroSciences' largest rival, publicly acknowledged that it would be "interested to look at this opportunity" if the company were in fact for sale.

Adding to the uncertainty: While Dow has won itself financial breathing room, it's not out of the woods yet. Analysts note that the company still is saddled with more than $25 billion in debt amid a global recession that has sapped demand for plastics and other chemical products.

Things could be much worse, however. Just a few weeks ago, management faced the prospect of being forced to close on the $15.3 billion purchase of Philadelphia-based Rohm & Haas Co. even though doing so would have left it badly overextended. Dow had planned to fund the deal with a $9 billion cash infusion from Kuwait's state-run Petrochemical Industries Co., but that agreement unraveled late last year.

On March 9, hours before a trial was to begin over whether Dow had to go through with the Rohm deal, the companies announced a compromise under which Rohm's two largest shareholders agreed to invest up to $3 billion in the combined company.

While that money helps, Dow plans to whittle down debt further by selling noncore operations, such as Rohm & Haas' Morton Salt division. It may not need to unload Dow AgroSciences if such sales come to fruition, Hilliard Lyons analyst Stephen O'Neil said in a report.

But the economic turmoil makes dealmaking hard to predict. As a result, Citigroup analyst P.J. Juvekar said in a report, the company "likely will keep the divestiture option open."

All the potential scenarios are being tracked with more than passing interest by local economic development officials and leaders of BioCrossroads, the region's life-sciences initiative.

Under CEO Jerome Peribere, 54, who took charge in 2004, DowAgroSciences increasingly has concentrated on biotechnology, using genetics to create vaccines and new strains of seeds.

The risk is that a buyer would see much of the Indianapolis operation as redundant with what it operates elsewhere, triggering the loss of hundreds of high-paying local jobs.

With its heavy debt, Dow is far from the ideal parent. These days, it's cutting costs rather than making major investments to grow businesses. But being part of Dow is vastly superior to the uncertainty that would go with a sale.
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