Dow Fires 2 High-Level Execs: Firm: Pair Held Unauthorized Buyout Talks
By Jewel Gopwani, Detroit Free Press
Apr. 13–In a sign of how hard Dow Chemical Co. will fight any takeover, the Midland-based company fired two high-level executives Thursday who it says held unauthorized talks with outside parties about acquiring the firm.
After learning of the discussions Tuesday, Dow Chemical fired senior adviser and former Chief Financial Officer Pedro Reinhard and Executive Vice President Romeo Kreinberg.
A spokesman for Dow said the information on the unauthorized talks came from parties outside the company but would not specify exactly where. The company also declined to say to whom the pair allegedly talked.
The information “left us absolutely no doubt that this was taking place,” said Dow spokesman Chris Huntley.
Dow surveyed its executives before saying Monday that it was not involved in talks about a buyout, Huntley said.
Kreinberg, in a phone interview with the Bloomberg news service, said the company’s accusations were unfounded. He said Dow accused him of being in secret talks with banks and foreign governments to acquire Dow. Kreinberg said he and Reinhard have been used as “scapegoats to finalize the last three months of takeover rumors.”
Dow Chemical, which has 43,000 workers, including 6,000 across the state, makes about 3,200 products ranging from synthetic latex to weed killer at more than 150 plants in 37 countries.
Speculation about a possible breakup and sale of the company first surfaced in late January when a London tabloid newspaper reported that several private equity firms were interested in the company.
Earlier this week, speculation grew when the Sunday Express said Middle Eastern investors had put together a deal, along with the U.S. buyout firm Kohlberg, Kravis, Roberts & Co., to buy Dow Chemical for $50 billion, citing people close to the deal.
As a result of the talk, Dow Chemical’s stock has shot up 20% since the beginning of the year.
“At the very least, we believe the firings confirm that there was some takeover interest — either by a private equity firm or by a strategic buyer,” said P.J. Juvekar, an analyst who follows Dow Chemical for Citigroup, in a note to investors.
HSBC analyst Hassan Ahmed said if private equity firms were in talks with the men fired Thursday, they were talking to the right people.
Kreinberg has deep knowledge of Dow’s operations, having worked for the company since 1977 and recently as executive vice president of performance plastics and chemicals.
Reinhard, who joined Dow in 1970, knows the company’s finances. He served as chief financial officer until 2005. Until Thursday, Reinhard had stayed on as an adviser to senior management. He remains a member of the company’s board of directors. That can change only if Reinhard resigns or shareholders vote him off the board.
Even with the confirmed interest in Dow, Juvekar wrote that a leveraged buyout of the company “is unlikely and would have to be hostile.”
More likely than a leveraged buyout, Juvekar wrote, is a joint venture like the one Dow announced earlier this week with Chevron Phillips, aimed at reducing the cost of raw materials to make the polystyrene plastics used in CD cases and for automotive interiors.
Huntley said the company is considering about 60 deals, ranging from joint-venture acquisitions to divestments of parts of Dow’s business, but none involves the entire company.
Contact JEWEL GOPWANI at 313-223-4550 or jgopwani@freepress.com. Staff writer Alejandro Bodipo-Memba contributed to this report.
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Copyright (c) 2007, Detroit Free Press
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