Monday, April 09, 2007

Dow Chemical At Center of $50 Billion Private Equity Bid

Dow Chemical to face $50 billion bid: report

LONDON (Reuters) - A consortium of Middle Eastern investors and American buyout firms is preparing a $50 billion approach for Dow Chemical Co. (DOW.N: Quote, Profile , Research) in what could be the world's biggest ever leveraged buyout, a paper said on Sunday.
Quoting sources close to the deal, The Sunday Express, a UK tabloid paper, said a financing package has been put in place for a break-up bid of between $52 to $58 a share and an approach valuing the company at least $50 billion could come by the end of this week.
Dow's shares closed up 35 cents at $44.47 on the New York Stock Exchange on Thursday.
At least half of the capital is being provided by investors from Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman, with the rest contributed by a number of U.S. buyout firms including Kohlberg Kravis Roberts (KKR.UL:
Quote, Profile , Research), it said.
Representatives of Dow Chemical and Kohlberg Kravis Roberts were not immediately available for comment.
The story follows reports in recent months that strategic changes were afoot at Dow, which has been moving toward a focus on specialty chemicals.
In March the Wall Street Journal said Dow was in talks with India's Reliance Industries Ltd. (RELI.BO:
Quote, Profile , Research) about a potential joint venture, citing people familiar with the matter.
Analysts had said they were unsurprised at the report and expected Dow to split off its basic chemicals and plastics business as part of what it has called its "asset light" strategy, which would give it a more nimble and higher-margin profile focusing on specialty chemicals.
In late February the Sunday Express reported that Dow could get a takeover offer of as much as $54 billion from buyout funds, without naming any sources.
The paper had said the approach was likely to come from a combination of global investors and American private equity giants, who intended to break up the group into smaller companies through a highly leveraged buyout.
(Additional reporting by Sinead Carew in New York)
© Reuters 2007. All Rights Reserved.

At the same time that pundits at the WSJ, NYT, and other usual suspects have been positing the end of Private Equity, the crown for Biggest Buyout Ever changes hands on a nearly weeky basis. Really, once the Dow Chemical deal passes from rumor to fact, the only question will be, who is going to be the Biggest Buyout Ever next week?

Despite talk by governments about changing how PE ventures are taxed, I suspect that as long as there are ponderous corporate entities with hidden value locked into their monolithic structure, legislation like Sarbannes-Oxley that makes it onerous and unattractive to be a publicly-held company, low interest rates and readily available financing, and boatloads of private money looking for a place to put it, Private Equity will remain open for business for a while yet.

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