Dow Chemical considering sale of its agrosciences unit
Dow Chemical considering sale
of its agrosciences unit
Despite news reports that say farming is "relatively" recession proof, Dow Chemical has conceded it is considering selling its agrosciences unit in the wake of several strategic moves that have not yielded expected results.
February 18, 2009 By AgriMarketing Magazine
February 17, 2009
Financially strapped Dow Chemical Co. acknowledges it may sell Indianapolis-based Dow AgroSciences LLC, the ag-chemicals-and-biotech firm that's one of the biggest jewels in the city's life sciences crown.
Dow Chemical CEO Andrew Liveris said on a Feb. 3 conference call with analysts that the Midland, Mich.-based company has teams working with investment banks to evaluate potential buyers for 12 major assets, including Dow AgroSciences.
Liveris, 54, made clear Dow Chemical would be a reluctant seller, but needs to raise cash.
"We are very proud of the [AgroSciences] business. It's a high earner. In the last five years, we've invested in it. It generated a great R&D pipeline … a lot of great niches and, in fact, good positions around the world in various crops and in various chemical markets," he said.
"But having said that, I would tell you that all options are on the table."
The Indianapolis company launched in 1989 as Dow-Elanco, a joint venture between Dow and locally based Eli Lilly and Co. The company adopted its current moniker in 1997, when Dow bought out Lilly's 40-percent share for $900 million.
The company long has produced commodities like pesticides and herbicides, and is still best known for its bread-and butter agricultural chemicals business. But under CEO Jerome Peribere, 54, who took charge in 2004, Dow AgroSciences increasingly has concentrated on biotechnology, using genetics to create plant vaccines and new strains of seeds.
The shift has revved up the financial results of the company, which employs 5400, including 1100 locally at its Zionsville Road headquarters near West 96th Street.
Dow AgroSciences in the fourth quarter reported record revenue of $885 million, despite a decline in ag chemical sales caused by product shortages and lack of available credit for farmers in some regions.
For the year, Dow AgroSciences' revenue rose 20 percent, to $4.5 billion, and operating profit rose 36 percent, to $761 million. Helping ratchet up revenue was the company's acquisition of nine hybrid seed research companies and related high-tech production facilities over the past two years.
Peribere said at a Feb. 10 bio-ag conference in New York that Dow AgroSciences has been able to push up profit by increasing revenue and holding expenses virtually in check.
"Simply put, our strategy is paying off," Peribere said.
The business accounts for less than eight percent of Dow Chemical's sales, but is one of its few bright spots.
The Michigan company reported a $1.6 billion loss for 2008's fourth quarter due to recession-driven decline in demand for its plastics and chemicals.
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