Dow Chemical’s Bid For The Privatization Of Pbb In

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Dow Chemical’s Bid for the Privatization of PBB in Argentina Executive summary Dow Chemical Company is considering acquiring 51% stake in Petroquimica Bahia Blanca S.A. (PBB) offered by the Government of Argentina. Acquiring PBB is the first stage of Dow’s project of expanding petrochemical business in the country. Dow is required to estimate how much it would offer to meet the requirements of the Argentinean State, overbid competitors but at the same time make the project profitable. The company should also take into account the country risk of Argentina because it is an emerging market with problems with exchange rates stability and freedom of capital repatriation. Dow should offer at least[1] $248.7 million for PBB. Calculating of present value of the project allows for increasing the cost of capital (15%) in comparison with similar projects in US (8-10%). The bid will meet all government requirements: - Price is bigger than $150 million, - Dow currently has enough cash to accomplish the acquisition and offer the guaranty in favor of the Government, - Net assets of the company are sufficient. The acquisition will allow expanding profitable business in Latin America and increasing attractiveness of the company among investors. The two current competitors of Dow for this acquisition (Perez Companc S.A. and Copesul) don’t currently meet the requirements of the bid because of the insufficient amount of net worth ($1.54 billion combined). It’s only 10 days left to offer price. If it is clear that there won’t be any other bidders except for Dow and the two mentioned companies that don’t have enough time to come through all legal procedures to create new company and attract a partner with big net worth, Dow is advised to offer $150 for PBB making the NPV of the project bigger by $98.7 million. Summary of facts:

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