Dow turmoil has upside for investors - JPMorgan

13 April 2007 14:10  [Source: ICIS news]

TORONTO (ICIS news)--The turmoil at Dow Chemical should offer some hope for the company’s shareholders, JPMorgan said on Friday.

 

The analysts said Thursday’s firing of two top Dow executives for unauthorised talks over a buyout suggested there were potential bidders for the Midland, Michigan-based chemicals major.

 

In addition, one can assume that profound differences regarding strategic direction and resource allocation led to the separate discussions,  JPMorgan said.

 

The risks and rewards to shareholders had now increased, due to the higher share price and uncertainty regarding Dow’s strategy and direction, the analysts said.

 

However, on balance the developments were a positive for investors, they said.

 

Potential outside bidders effectively would raise the stock’s floor price and reduce management flexibility to pursue strategies at the expense of returns to shareholders, JPMorgan said.

 

Dow’s share price closed at $46.0/share, up 2%, on Thursday in New York. The stock rose sharply earlier this week on speculation the company may be bought and broken up.

By: Stefan Baumgarten
+1 713 525 2653

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