Dow Weighs Options for Ag Business Amid Consolidation

October 22, 2015 11:27 AM
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Dow Chemical Co. is weighing options for its business that supplies farmers with pesticides and genetically modified crop seeds, the latest sign of consolidation in the global agriculture industry.


The Indianapolis-based Dow AgroSciences unit, which generated $7.3 billion of revenue last year, competes with Monsanto Co. and DuPont Co. The review was announced by Dow in a statement Thursday alongside a plan to reduce investments in two Kuwait joint ventures. Dow also reported better-than-expected third-quarter earnings and raised its dividend. The shares rose the most in almost four years.

Dow Chief Executive Officer Andrew Liveris has sold off several businesses in recent years -- most recently its chlorine business -- as the Midland, Michigan-based company tries to focus on more profitable, value-added products.

Agriculture-focused companies have shown an increased appetite for deals in 2015 amid weaker earnings and lower commodity prices. In August, U.S. fertilizer producer CF Industries Holdings Inc. agreed to buy assets from a Dutch competitor for about $5.4 billion. Another fertilizer company, Potash Corp. of Saskatchewan Inc., made a bid for German rival K S AG in June, withdrawing the offer earlier this month.

DuPont Breakup?

In April, Monsanto proposed a $43.7 billion takeover of Swiss pesticide maker Syngenta AG, canceling the bid in August. The revelation of that potential deal, which would have been the biggest in the industry, sparked a wave of discussions between the largest companies, Liveris said on a conference call with analysts.

“Everyone is talking to everyone,” he said.

Monsanto CEO Hugh Grant said earlier this month he continues to search for acquisitions because consolidation is “inevitable.” Meanwhile the departure of DuPont CEO Ellen Kullman may clear the way for a separation of its agriculture business, the world’s-second biggest seed supplier after Monsanto, according to analysts including David Begleiter at Deutsche Bank AG.

Kuwaiti Ventures

It’s not the first time Dow has raised the prospect of selling its agriculture unit. In 2009, Liveris said the company had received “strong interest” in the business. He said Thursday there’s no imminent deal for Dow AgroSciences and that Dow has no “big M&A” lined up. However, Liveris also said his company is in talks with Corning Inc. about the latter’s stake in Dow Corning, their 72-year-old silicones joint venture. Dow said last year that Corning was interested in selling its interest.

Dow said Thursday that by the year-end it will cut its stake in MEGlobal, a venture with Petrochemical Industries Co., and receive pretax proceeds of $1.5 billion. Dow will also reduce its interest in the Greater EQUATE venture by mid-2016.

Liveris, almost 11 years into his tenure as CEO, announced a reorganization of his executive leadership team, promoting Vice Chairman Jim Fitterling to chief operating officer and Chief Financial Officer Howard Ungerleider to vice chairman. The three of them will form a new office of the chairman and CEO. Vice Chairman Joe Harlan will relocate to Chicago.

Third-quarter earnings excluding some items was 82 cents a share, exceeding the 68-cent average of 19 estimates compiled by Bloomberg. Sales decreased 16 percent to $12 billion, trailing the $12.4 billion average estimate.

The agriculture unit posted a wider loss in what is a seasonally weak quarter. Bearish corn and soybean markets and a slumping Brazilian real have prompted DuPont, Monsanto and FMC Corp. to forecast earnings below analysts’ estimates.

Dow jumped 6.2 percent to $50.41 at 10.15 a.m. in New York after earlier gaining 8.4 percent, the most intraday since October 2011. The company raised its quarterly dividend to 46 cents a share from 42 cents.


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