Dow De-leveraging to Continue $$

• Posted by ToddSullivan
• on March 1st, 2010

Been awhile trying to sell this unit but it looks like it will be worth the wait

From the WSJ:

Private equity firm TPG has emerged as the leading candidate to purchase Dow Chemical Co.’s Styron plastics business, according to several people familiar with the matter.

Dow has been auctioning the business, which makes rubber, latex and polystyrene, for a number of months, and is expected to receive more than $1.5 billion for the unit. A deal could be announced as early as this week.

While a number of private-equity players including Bain Capital have been around the sales process, TPG has emerged as the most likely buyer, these people said. Apollo Management has also been a late-stage suitor, these people said, but is fading from contention.

A Dow spokesman did not return a phone call or email seeking comment. Deutsche Bank and HSBC are handling the sale for Dow.

Styron resins are used in construction and the auto industry. It has around 1,500 people at 40 plants world-wide.

Midland, Mich.-based Dow has said its goal is to complete a sale in the first quarter of 2010.

The largest U.S. chemicals company put Styron up for sale in July and said at the time the unit could fetch $1 billion to $2 billion.

The business has annual sales of around $5 billion. Pretax earnings are around $300 million, down from $500 million in past years as the recession and higher raw-material costs squeezed profits, according to people familiar with the matter.

The process has been a slow one as Dow extricates the business from its operations. One sticking point has been various contracts between Dow and the Styron unit, which are customers and suppliers to each other.

This is a nice deal for Dow. They are currently sitting on $19B of LT debt (up from $8B on 12/31/2008). Paying down the debt from the Rohm & Haas purchase has been a priority and they have done well trimming near $3B off the post acquisition $22B peak in June of 2009.

This move will further accomplish those goals….

On another note, it is good to see M&A shaking loose in general. It means markets are returning to m ore normalized conditions and credit markets (for big solid buyers) are becoming un-frozen. Those conditions are good for everyone…

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