What Might Be Tagged At Dow’s Yardsale?
As you have may have heard, Dow Chemical plans to sell more businesses. Back in December, the company said it would get rid of its epoxy resins and chlorine-related business, which would make the bulk of $3.0 to $4.0 billion worth of divestitures. Mind you, these numbers here are a little funky. They refer to the pre-tax proceeds to Dow from transactions that aren’t necessarily even being negotiated yet. However, the company tends to get strong valuations when it sells businesses, so I would expect that the proceeds from deals would be within the range and even towards the top of it.
Last week, at an investor event in Saudi Arabia, the company announced it would put an additional $1.5 to $2.0 billion in businesses up for sale. CEO Andrew N. Liveris wouldn’t say what the businesses are, but he would certainly characterize them. They would be nice businesses, likely coming out of its Performance and Functional Materials units, and perhaps reasonably profitable. But they would be more meaningful to potential buyers than they currently are to Dow. They would be, Liveris promised, “Lots of small, little businesses that you never even track, that you never follow, and that you never even knew we had.”
He was addressing analysts, thus casting a wide net. They are only acquainted with the solid form of ethylene known as polyethylene and Dow AgroSciences.
The Chemical Notebook takes Liveris’ remarks as a challenge. What are the most obscure Dow businesses? Two that jumped out at me are are Dow Plastics Plastics Additives And Dow Oil & Gas. Dow put the plastics additives unit up for sale last year and then withdrew it from the market. Oil and Gas is tiny, about $270 million in annual sales. It is a market facing unit that sells chemicals for oil and gas exploration and extraction. This is a very marketable business, with companies such as Solvay and Ecolab plunging further in this area. My only reservation about Dow selling this business is that the chemistry on offer in oil and gas overlaps with other Dow businesses.
Additionally, I combed through Dow’s Product Safety Assessment Finder, which by the way, is a great source of information for many chemicals. I asked question “what are the real oddball businesses?” Here are few (Don’t take this as a list of possible sales, though. Some, as you will see, are likely keepers.):
Silicones and Feel Modifiers: These sound dirty. They’re not. They are used in leather finishing. They also sound like something Dow Corning would sell. With a tradename like ROSILK, I’ll guess these came from Rohm and Haas.
ADSORBIA Adsorbent Media: Did you know that Dow offers titanium dioxide based adsorbent media? Now you do. Dow has a market-facing water treatment businesses, so while Dow selling something made of TiO2 sounds strange, it does seem like this is part of a complementary market offering.
Stannous Fluoride: This is fluoride…for toothpaste. Take that, Cavity Creeps!
Markers and Dyes: These are markers and dyes used to color fuel. Why would you color fuel? So you can easily tell different kinds of fuels apart. For instance, diesel and number 2 oil are taxed at different rates. Home heating oil is taxed at the lower rate. It gets a red dye to prevent and detect its illegal use as a transportation fuel. I know this because heating oil was the Tullo family businesses. Also, we drove diesel cars, including that terrible Oldsmobile, in the late 70s. This seems to be another one that came from Rohm and Haas (Morton to be precise), as the brand name MORTRACE is associated with this business.
Nickel-plating process products: I never knew Dow did this. However, don’t think trophies and baby shoes. This business primarily serves the electronics industry.
Infrared Materials: These are zinc selenide and other specialty glass materials. Dow sells them as shapes that are pressed into lenses for infrared sensors, night vision goggles and so forth. These don’t strike me as particularly dangerous materials unless the Marines are after you at night.
Powerhouse Solar Shingles: These are photovoltaic cells that are easier to install and more inconspicuous than conventional polysilicon solar cells. This is a good business and addresses a need. However, I never fully understood why Dow is in this business. It has kind of a pet project feel, so it could be a keeper for a while. But I think that Dow will sell this business eventually.
Borohydride and other boron based compounds: These are used as chemical intermediates, largely in fine chemicals. Similarly, Dow also supplies trimethyl borate. My boss, Mike McCoy, swears that this business, another Rohm and Haas joint, is sizable, with perhaps tens-of-million-of-dollars in revenues. I don’t doubt that. It does seem like a vestige, one that doesn’t seem difficult to carve out.