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Dow Chemical to Sell Certain Corn Seed Assets for $1.1B

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Dow Chemical (DOW - Free Report) has reached an agreement to divest part of its corn seed business in Brazil to CITIC Agri Fund for $1.1 billion.

The U.S. chemical giant noted that the asset sale is intended to satisfy its commitments to Brazil’s Administrative Council for Economic Defense (“CADE”) in connection with its conditional regulatory approval of the proposed $130 billion mega-merger of Dow and DuPont (DD - Free Report) .

The assets being divested include seed processing plants and seed research centers, a copy of Dow AgroSciences’ Brazilian corn germplasm bank, the Morgan seed brand and a license for the use of the Dow Sementes brand for a specific period of time. These businesses generated sales of around $287 million last year.

Dow said that the sale of these businesses will be conditioned on Dow and DuPont closing their merger and other customary closing conditions including approval of the divestiture by CADE. The divestment of the corn seed assets is in addition to the earlier announced sale of certain parts of DuPont’s crop protection business and Dow’s global ethylene acrylic acid copolymers and ionomers business.

Dow and Dupont, last month, secured clearance from Canada's Competition Bureau for their planned merger after they agreed to sell certain assets and businesses. The companies also received the U.S. antitrust approval for the merger in June. The companies, in May, also secured conditional regulatory approval in China and Brazil for the merger. Moreover, the European Commission conditionally approved the merger in Mar 2017.

The companies continue to work constructively with regulators in the remaining jurisdictions to obtain approval for the merger and continue to expect the closing of the merger to take place in Aug 2017.

Following the completion of the merger, the combined entity would eventually break up into three independent companies through tax-free spin-offs. The breakup is still expected to take place within 18 months after the completion of the deal. The merger is projected to deliver cost synergies of around $3 billion and growth synergies of roughly $1 billion.

Dow Chemical has modestly underperformed the Zacks categorized Chemicals-Diversified industry over the past three months. The company’s shares gained 5.7% over this period, compared with roughly 6.1% gain recorded by the industry.


Dow currently holds a Zacks Rank #4 (Sell).

Stocks to Consider

Better-placed companies in the chemicals space include Albemarle Corporation (ALB - Free Report) and FMC Corporation (FMC - Free Report) , both sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albemarle has an expected long-term earnings growth of 14.5%.

FMC has an expected long-term earnings growth of 11%.

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