Dow Chemical DOW has completed the divestment of its post-harvest specialty chemical business – AgroFresh – to Boulevard Acquisition Corp. for more than $900 million. Boulevard is a public investment vehicle formed by investment firm Avenue Capital Group. The move represents a part of Dow’s aggressive portfolio management actions.
The transaction was cleared by Boulevard’s shareholders on Jul 29. Under the agreement, Dow expects to receive significant ongoing cash payments associated with service and other agreements with AgroFresh. Moreover, the Michigan-based chemical giant is eligible to receive cash earn out of $50 million if AgroFresh achieves specific targets.
AgroFresh is a leading global provider of technologies for the horticultural and agronomic markets, offering a range of products and services aimed at boosting the freshness, quality and value of fresh produce. The entity offers the SmartFresh Quality System, its flagship product, geared to preserve firmness, texture and appearance of fruits during storage and transport. This freshness protection technology is available across 45 nations globally.
Following the deal closure, AgroFresh now has become a fully-owned subsidiary of Boulevard and the latter has been renamed AgroFresh Solutions, Inc. Dow will retain a non-consolidated minority stake in the new integrated entity. It will initially hold around 35% interest in the entity.
The divestment of AgroFresh is in sync with Dow’s focus on optimizing its portfolio by selectively spinning off or selling its underperforming assets and gradually shift to high-growth markets.
Dow is also carving out a considerable portion of its chlorine value chain and merge that with Olin Corp. OLN in a deal valued at around $5 billion. The transaction is expected to close by the end of 2015. With this transaction and the sale of AgroFresh, Dow now expects to raise more than $12 billion from asset sales, well ahead of its earlier stated target of $7–$8.5 billion.
Dow’s shares fell around 1.3% to close at $46.46 on Monday.
Dow currently has a Zacks Rank #2 (Buy).
Other companies in the chemical space worth considering include Innospec Inc. IOSP and Trecora Resources TREC, with both holding a Zacks Rank #1 (Strong Buy).
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