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Is Dow AgroSciences on the sale block?

The agricultural industry is abuzz with speculation that Dow Chemical may be in the process of selling one of its prized assets: the Dow AgroSciences business unit. While accounting for less than 8% of parent Dow Chemical’s sales, revenue for the AgroSciences unit in 2008 rose 20%, to $4.5 billion, and operating profit was up 36% (excluding certain items).

The story came to light during a February 3 conference call with analysts, in which Dow Chemical CEO Andrew Liveris said the company is working with investment banks to evaluate potential buyers for 12 major assets, according to a report in the Indianapolis Business Journal.

Dow Chemical is facing a cash crunch, due in part to a downturn in the worldwide economy and billion-dollar acquisitions that are in the midst of legal battles. The company reported a $1.6 billion loss in the fourth quarter of 2008.

“We [Dow Chemical] value Dow AgroSciences,” says Bob Plishka, company spokesman for Dow Chemical. “Given the unprecedented economic environment, we continue to assess all options for providing greater financial flexibility through the current period. As we have recently indicated to investors, these include the potential sale of various assets and no Dow businesses will be exempt from consideration. Final decisions about which assets may be considered for sale or divestment will be based on the best long-term portfolio fit for Dow and fulfillment of the company’s strategy.”

Although it is unclear if, or when, a sale would go through, there is a lot of speculation as to which company would be in the market for such a large chunk of the agricultural seed and chemical business. Reports speculate that the asking price could top $10 billion.

With the global economic meltdown, and an incredibly tight credit market, there are only a few players with the resources to pull off such a deal. And any further consolidation in the biotech and ag chemical arena would likely run into some heavy scrutiny by federal officials.

Rival company officials would not comment directly on the news of a possible sale.

“Syngenta will always look at opportunities when they present themselves. They need to be a strategic fit to our portfolio and meet our financial acquisition criteria,” says Médard Schoenmaeckers, head of media relations for Syngenta. “We have a strong balance sheet and continuously look for the right acquisitions. Over the past 18 months, we have made five acquisitions in our Seeds business in flower, vegetable and field crop seeds across the world.”

No timetable has been set, so any sale, if it occurs at all, could be a drawn-out process. The sale could also hinge on how long the worldwide economic crisis affects the overall balance sheet at Dow Chemical, or how much a suitor is willing to offer.

“While Dow has been moving forward on a number of fronts in recent weeks, no specific actions have been finalized. Dow is committed to keeping investors and other key stakeholders informed at the appropriate time as we have more,” Plishka says.

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