Leveraged Buyout of Dow Chemical Could Be World's Largest Ever

Reuters is reporting from London that "a consortium of Middle Eastern investors and American buyout firms is preparing a $50 billion approach for Dow Chemical Co. 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." (ABC News article) The chemical manufacturing company based in Midland, Michigan is in the midst of shifting focus to the specialty chemical market, and there have been rumors of a buyout of Dow Chemical for the last few months.

According to a Fox News article, "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, it said. Representatives of Dow Chemical and Kohlberg Kravis Roberts were not immediately available for comment." (Fox News article) All of the speculation regarding the leveraged buyout has driven Dow's stock price up in recent days.

This latest bid for the corporation comes amid months of speculation on the future of the company. "In March the Wall Street Journal said Dow was in talks with India's Reliance Industries Ltd. 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." (ABC News article) While the details of the leveraged buyout have yet to be ironed out, as well as the details of the restructuring that will take place if the offer is accepted, it is clear that big changes are in store for the traditional chemical manufacturing company.

The Dow Chemical Company is the largest employer in Midland, Michigan, has a large facility in Freeport, Louisiana, and employees many others all across the world. There is no word on how the current situation will affect employment opportunities with the company, nor is there any word on the fate of Dow Corning, which is a joint venture of the Dow Chemical Company and Corning.