Dow Chemical seems poised to keep AgroSciences

Midland, Mich.-based Dow Chemical Co. is still considering divesting Indianapolis subsidiary Dow AgroSciences LLC. But
chances that the chemical manufacturing giant will sell its local agricultural chemical and biotech unit appear to have decreased.

In a conference call with analysts July 30, Dow Chemical CEO Andrew Liveris said his company spent the first half
of 2009 restructuring as a result of the recession. He said Dow went “very, very deep” into explorations for divesting
Dow AgroSciences—which has 1,200 employees in Indianapolis—although not so far as to enter negotiations with any
potential buyers.

Unless a sale could generate a full “strategic premium,” Liveris said he’d
rather hang on to Dow AgroSciences and grow it.

“Based on our strategic review and our desire to move to
higher-growth, technology-driven and innovation-based business platforms, I can tell you that our current thinking and my
personal preference is this business should be part of Dow’s long-term future,” Liveris told analysts.

Liveris

“With that said, we remain open to exploring all options that will strengthen Dow and position it for growth
while at the same time maximizing value for our shareholders,” he continued.

When Dow first dangled the
possibility of selling AgroSciences early this year, it was facing a financial squeeze. But the company’s financial
condition has since improved, and analysts have been skeptical Liveris would release his grip on a business that fits so neatly
with his strategy.

Dow AgroSciences long has produced commodities such as pesticides and herbicides, but in recent
years increasingly has concentrated on biotechnology, using genetics to create plant vaccines and new strains of seeds.

A report by research firm Gerson Lehrman Group calls a sale “very unlikely,” even though the business
might fetch as much as $12 billion.

“It is conceivable that Dow is utilizing the potential monetization
of Dow AgroSciences as a bargaining tool as it negotiates divestment opportunities in its commodity lines,” the report
said.

“Imagine, for example, the following remarks that Dow could make to a potential buyer:  ‘Your
price for our such-and-such commodity unit is inadequate; we don’t need to sell this business, as we have other assets,
such as Dow AgroSciences, which can bring in substantial cash.’”

On the conference call, Liveris
said options for Dow AgroSciences include strategic alliances with other businesses or an initial public offering.

Dow AgroSciences generated $140 million in earnings before interest and taxes in the second quarter, a 61-percent drop
from the same period last year.

Revenue dipped 12 percent in the second quarter, to $1.2 billion. Dow AgroSciences
attributed the decrease to unusually wet weather in North America and Europe, and extreme drought in Argentina, which limited
the use of its weed-killing chemicals. In addition, lower farm commodity prices drove farmers to reduce costs, the company
said.

Dow Chemical lost $486 million in the period compared with profit of $762 million in the same period last
year. Revenue fell 31 percent, to $11.3 billion.

Dow Chemical’s loss was driven by charges related to
its $16.5 billion buyout of Philadelphia-based Rohm & Haas in April and dismal sales for chemicals.

The
company announced July 29 that Dow AgroSciences’ CEO, Jerome Peribere, was stepping down and moving to Philadelphia
to lead its advanced materials business, which includes Rohm & Haas.

Peribere’s successor is Antonio
Galindez, vice president of Dow AgroSciences’ crops business.

On July 24, at IBJ’s Life
Sciences Power Breakfast at the Westin Hotel in downtown Indianapolis, Peribere called Dow AgroSciences the parent company’s
“best asset.”

Dow “doesn’t have to sell Dow AgroSciences,” he said. “So then
it’s a question of, is eventually the price going to be so fabulous that you can’t refuse that proposal?”•

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