Dow Chemical (DOW) Could Unlock Gobs of Value with Full Split
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Price: $29.38 -3.13%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 4.7%
EPS Growth %: +385.7%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 4.7%
EPS Growth %: +385.7%
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Dow Chemical (NYSE: DOW) was active last week following news that Dan Loeb's Third Point LLC took a large stake in the company and recommended the spinoff of certain assets.
Bloomberg noted today that Loeb's advice shouldn't be brushed aside. Wall Street analysts see Dow's stock price at $51.40 following a break-up, which is 18 percent above the company's closing price on January 24th.
Dow currently has plans to divest about $4 billion of assets, though analysts think a full split would be best. Loeb's proposal calls for Dow to separate its petrochemical business from its specialty chemical unit.
When considering improvements in operations along with overall cost cuts, Dow's petrochemical spinoff could generate about $9 billion in EBITDA, more than what all of the company makes right now. Loeb also said the company's focus on specialty chemicals could double EBITDA to $5 billion over the next three years.
Markets also tend to value pure-plays with a higher multiple, especially when there's better business buried underneath the fluff.
Shares of Dow are down 1.5 percent Monday.
Bloomberg noted today that Loeb's advice shouldn't be brushed aside. Wall Street analysts see Dow's stock price at $51.40 following a break-up, which is 18 percent above the company's closing price on January 24th.
Dow currently has plans to divest about $4 billion of assets, though analysts think a full split would be best. Loeb's proposal calls for Dow to separate its petrochemical business from its specialty chemical unit.
When considering improvements in operations along with overall cost cuts, Dow's petrochemical spinoff could generate about $9 billion in EBITDA, more than what all of the company makes right now. Loeb also said the company's focus on specialty chemicals could double EBITDA to $5 billion over the next three years.
Markets also tend to value pure-plays with a higher multiple, especially when there's better business buried underneath the fluff.
Shares of Dow are down 1.5 percent Monday.
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