By 2010, Dow Chemical Co. plans to sell more assets, continuing to work toward paying its debt after the acquisition of Rohm & Haas. The company also plans to recast itself as a speciality chemicals company in a bid to nearly double margins from 12% to 20% and quadruple earnings per share. Dow defends its US$16.5 bln acquisition of Rohm & Haas as specialty chemicals have higher margins and are less exposed to business cycles than bulk chemicals.
Till date, Dow has divested around US$3.5 bln worth of assets in 2009, including the sale of its powder coatings business to Akzo Nobel for an undisclosed sum. An agreement has been reached to sell Morton Salts, a subunit it took over through Rohm & Haas, to K+S for US$1.7 bln. The sale of its 45% stake in the Dutch oil refinery Total Raffinaderij Nederland to Valero Energy is awaiting completion. The sell-off will continue in 2010. It expects to earn another US$2 bln from asset sales, drawn from a pool of assets worth around US$12 bln. These include polystyrene, rubber and latex business Styron, several mid-sized standalone businesses and many of the petrochemicals assets originally slated to be part of the failed K-Dow joint venture with Petrochemicals Industries Company of Kuwait. Underperforming plants have been closed down: in 2009, two Louisiana ethylene plants shut their doors, and a third is due to follow in 2011. Dow Chemical to divest more assets in 2010.
In a meeting with investors, the company has mapped out a three-path process that identifies options for further debt reduction of about US$12 bln. The first path involves an additional US$3.5 billion in divestitures, which includes the sale of the company's Styron business. Dow expects this deal to close in Q1-2010. The company also plans to divest 10 to 15 other businesses which range in size between US$100-300 mln in annual revenue. For the second path, Dow said it could receive proceeds from a resolution of its dissolved Kuwait joint venture. Lastly, the company is looking to gain from reducing its stake in its basic chemicals business, as part of its plan to focus on its more profitable specialty chemicals business.