Dow Chemicals

The result is about Dow Chemicals bid for the privatization of Petroquimica Bahia Blanca (PBB). PBB, a producer of both ethene and Polyethylene in Argentina, is being privatized by the local government. Dow holds a preeminent market position in Ethylene and Polyethylene, and wants to utilize this opportunity to set forth into Argentina. Dow has developed a three-stage operational strategy for expansion of its polyethylene trading operations in Argentina.The eruditeness of PBB represents the first stage of the strategy and provides a access to the instant and third stage. The cash flows from each stage of the get off induce been valued using the discounted cash flow (DCF) approach. The discount rate for the valuation has been adjusted for the country risk premium, and a modified version of CAPM has been employ to calculate a best case and a worst case estimate of the discount rate. This gives us a range of possible eruditeness values for PBB.Given that the acquirement also enables Dow to benefit from the from the high cash flows of the second and third stage of the roll and that other parties are also interested in the acquisition, it is recommended that Dow bids a relatively high price of $280 million for PBB. at a lower place is a free essay on Dow Chemicals beseech For The Privatization Of Pbb In from Anti Essays, your source for free research pieces, essays, and term paper examples. Dow Chemicals Bid for the Privatization of PBB in Argentina Executive heavyset Dow Chemical Company is considering acquiring 51% stake in Petroquimica Bahia Blanca S.A. (PBB) disco biscuited by the Government of Argentina. Acquiring PBB is the first stage of Dows project of expanding petrochemical telephone circuit in the country. Dow is required to estimate how much it would offer to meet the requirements of the Argentinean State, c all(prenominal) competitors but at the same time make the project profitable. The bon ton should also take into account the c ountry risk of Argentina because it is an appear market with problems with exchange rates stability and freedom of capital repatriation. Dow should offer at least1 $248. 7 million for PBB. Calculating of resent 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 harm 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. nd Copesul) wear outt currently meet the requirements of the bid because of the deficient amount of net worth ($1. 54 billion combined). Its entirely 10 days left to offer price. If it is clear that there wi nt be any other bidders except for Dow and the two mentioned companies that dont have enough time to come through all legal procedures to create new company and attract a follower 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 During the 1990s, the economy of Argentina started to call back after Carlos Menem took power