Analysts: DuPont, Monsanto Potential Buyers For Dow’s Farm Business
October 26, 2015 Correction: It was incorrectly stated that Dow said on October 22 “it may exit the [farm] business altogether, and analysts touted DuPont and Monsanto Co. as potential buyers.” That statement has been removed and replaced with a statement taken from a Dow news release on October 22.
Chemical conglomerates Dow Chemical Co. and DuPont both made big bets on their farm businesses over the past two years, but their fortunes have diverged dramatically, reports Swetha Gopinath and Sneha Banerjee on Reuters.com.
In a company news release October 22, Dow made the following statement:
The Dow Chemical Company today announced that it will be focusing its ongoing portfolio management actions on its Dow AgroSciences business. The priority will be on reviewing all options with a best owner mindset to extract further value from this highly attractive business.
Dow AgroSciences has delivered significant value to Dow and is well-positioned to further increase the value to shareholders. All potential options will be compared to the value created by retaining the business within Dow. Given the potential synergies in a consolidating agricultural market, it is an appropriate time to review our portfolio to ensure a best-owner model.
To be sure, the agriculture industry is struggling to cope with falling crop prices and weak demand for crop protection products, which has led to falling sales in the farm business at both Dow and DuPont.
But, analysts say that while DuPont’s fortunes could turn as the industry’s recovers, Dow is also struggling with more company-specific problems at its seed business.
These issues, which include a poor distribution network, a limited variety of hybrids and high R&D costs, would not hinder companies with a bigger scale and they could even benefit from Dow’s R&D capability and a robust pipeline of new products.
“A different owner might be able to boost profitability immediately,” said James Sheehan, an analyst with SunTrust Robinson Humphrey. He estimates selling the business could net Dow proceeds of about $15 billion.
Monsanto, the world’s largest seed company, is looking for acquisitions after its failed $47 billion bid for Syngenta.
Read the full story on Reuters.com.
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