Dow Chemical Co. has been in the spotlight the past few weeks, since the company has been the subject of rumors that it is about to do a major deal with India's Reliance Industries Ltd. I've watched as the story has appeared to take on more credibility almost every day. It started with daily updates from the financial press in India and Britain (most of the stories not attributed to any named sources). Then, as Dow's stock price began to jump as a result of the rumors, the financial press in the United States started to take note. Late today, the Reuters news agency picked up the story, and it seems to put it in the proper perspective.
Analysts said Dow is likely to split off the basic chemicals and plastics business as part of what it calls its "asset light" strategy, which would give it a more nimble and higher-margin profile focusing on specialty chemicals. "This is the time; there's so much pressure," said Hassan Ahmed, an analyst with HSBC. "So Dow management has a gun to their head to do something." Dow said it is involved in many different negotiations but would not comment on any specific talks. "Right now we are examining more than 60 potential (merger and acquisition) deals," said Chris Huntley, a Dow spokesman. "Joint ventures are at the heart of our asset-light agenda," he added. "We are continually talking to all manner of companies, big and small, as we assess the value to Dow of those companies."We're covering changes at Dow this week too, concentrating on the plastic-specific facts, but folding in a mention of the Reliance rumors. Reliance seems to want to make a big splash outside India (the company also has been rumored to have an interest in GE Plastics. A deal with Dow would fit the bill. Is a purchase or major joint venture in the works? We might know very soon.