Dow: Private Equity With a Middle Eastern Twist

Dow: Private Equity With a Middle Eastern Twist

By Michelle Krebs April 9, 2007

A British newspaper reports U.S. private equity firms with Middle Eastern investors are preparing a bid of at least $50 billion for Dow Chemical Co., the largest U.S. chemical maker.

Rumors of Dow’s purchase have been swirling for the past couple months, and it was speculated its purchase would be the largest in history by private equity. Indeed, the latest rumored deal would be the largest by billions.

London’s Sunday Express, citing unidentified "sources close to the deal," say the offer for Michigan-based Dow, which supplies auto industry and other businesses, is between $52 and $58 a share and will be made by the end of this week. The speculation sent Dow stock soaring.

Kohlberg Kravis Roberts & Co. is among those backing the bid, the newspaper reported. At least half of the funding is coming from investors in Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman, the newspaper said.

Middle Eastern Twist

Middle Eastern investors have loads of money and can’t be ruled out in private equity deals, including the many in the works or likely to occur in the future in the U.S. auto industry.

Ford’s partial sale of Aston Martin was to a group of investors that included racing mogul David Richards with Kuwaiti companies, Adeem Investment and the Investment Dar Company.

Dow Denial

Dow is considering more than 60 deals as part of a plan to reduce broad fluctuations in earnings, a company spokesman told investors in March, as reported by Bloomberg. Dow has no plans for a "big bang'' transaction, the spokesman said.

In response to the latest rumors detailed in London’s Sunday Express, the same spokesman told Bloomberg: "If I read it one more time on the third page of a third-rate newspaper in the U.K. and anyone gives that any credibility, please give us a little more credit for sophistication than that. This clearly just went out of control, and I hope I am putting it back under control with answers like these.''

It’s doubtful the speculation will be under control until a deal is done.

The Sunday Express reports bidders are being advised by JPMorgan Chase & Co. in London –- the same outfit running the DaimlerChrysler sale of Chrysler Group. Meantime, Goldman Sachs Group, Inc. may be advising Dow Chemical on a bid defense, the newspaper said. Provisions in the purchase have been made to cover potential pension deficits or asbestos claims that new owners might have to fund, the newspaper said, citing an unidentified individual.

The takeover would be worth more than the current record-setter -- the proposed buyout of TXU Corp.,  valued at $44 billion, including debt. It would add to the stunning $648 billion in deals announced so far this year, according to Bloomberg. And we're only in month four.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.