Dow may still seek buyout despite firings

12 April 2007 16:24  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Dow Chemical may still entertain a buyout, even as it dismissed two executives for having unauthorised discussions with third parties, sources in the financial community said on Thursday.

“Dow has done the right thing, but it doesn’t mean the deal isn’t going to happen eventually,” a source said. “I suspect everything we’ve read in the newspapers was a trial balloon from private equity to have someone at Dow take a look at a potential deal. It’s very unusual for private equity to go hostile.”

The source said that a private equity firm would most likely seek to do a deal with a strategic partner rather than on its own. Dow has said it is not in leveraged buyout talks.

“I can’t believe that private equity would buy Dow, run it for three years and take it public again,” he said.

Dow has been rumoured to be a target of private equity firms as well as India’s Reliance Industries. However, another source pointed to recent reports that Middle East companies were teaming up with private equity to acquire Dow.

“I suspect they may have been talking to the Saudis and Qataris as well as Reliance,” says the source. “Reliance has capital but not much else to offer. SABIC [Saudi Basic Industries Corp] would give Dow access to the feedstocks and fit well with its asset-light strategy.”

“It’s not surprising that [Pedro] Reinhard was behind this,” another source added. “He didn’t get the top job, but it was clear from Wall Street’s perspective that he was the guy pulling all the strings.”

“We don’t usually get this kind of soap opera,” said another source.

Earlier on Thursday, Dow sacked Reinhard, a senior adviser and member or the board, as well as Romeo Kreinberg, an officer of the company, for “unauthorised discussions with third parties about the potential acquisition of the company”.

“From our understanding, we believe only these two individuals were involved,” said Dow spokesman Chris Huntley.

By: Joseph Chang
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