Rumors floated on the PE news circuit this past week that a consortium of Middle Easter investors and KKR are putting together a deal to buy out Dow Chemical Co for US $50 billion. This would be a huge PE deal, but not a terrible surprise given that pretty much any company with a market valuation below $100 billion is in the view of private equity buyers. This has been, in many ways, the private equity deal year with the dollar figures becoming larger every passing month.
But I do not concern myself with that – partly because I do not understand it as well. What I do understand though is that any time Middle East is mentioned in the United States, a red flag goes up in the eyes of some people, and like it or not, the hidden xenophobia towards Arabs reveals itself. This deal will probably not be very different. “Middle East investors” is not a term American politicians (some) will like very much, especially when it relates to the buy out of a firm that has some thing to do with markets that can fall within a broadly described category of “sensitive to national security”. Chemicals probably easily fall in that category, especially if the description of that term is stretched to the degree that I believe certain political forces will try to in the weeks and months to come.
This may be yet another Dubai Ports saga in the making! When that debacle occured I wrote:
What craziness from the so-called representatives of the American people! Shameful and quite unpatriotic. If their opposition to this deal is indeed due to the overwhelming number of calls from their constituents (which I highly doubt), then this should be a shameful realization of the protectionist racism that has infiltrated this society in the post 9-11 era. The rejection of this deal was not about security, it is just a blatant display of racism against Arabs (and probably Muslims in a wider context)
A trusted journalistic source, Daniel Primack of PEWire writes the following in his daily blog:
*** Dow Chemical Co. is downplaying buyout rumors, after a UK tabloid reported that KKR and several Middle Eastern investors are prepping a $50 billion bid. A company spokesman says that Dow has “no interest” in a leveraged buyout, because it believes it can provide the most shareholder value by remaining a public entity.
Now there are plenty of reasons to dismiss the story –for example,the same tabloid published a very similar reporttwo months ago – but “shareholder value” isn’t one of them. After all, this supposed bid would be at between $52 and $58 per share, whereas Dow hasn’t traded above $50 in years…
But my main interest this morning is in positing a political query – rather than a financial one. Let’s assume, for the sake of argument, that such an offer is indeed in the offing, and that the Dow board of directors accepts. The next issue to arise is not so much whether or not shareholders would accept (they would, after holding out for a few more bucks), but whether the United States would accept. You know, the special committee made up of talk radio and cable news denizens.
This is where I see the real problem. Not only would an American icon be taken over by Middle Eastern sheiks, but Dow does have some national security-related responsibilities (particularly in the broad, dependency sense). Plus, who knows when we’ll want to use napalm again…
For the record, I find such concerns to be ignorant at best, and xenophobic at worst. Ditto for the manufactured Dubai Ports World controversy last year. But I’m already seeing it expressed in various political blog posts… Certainly worth keeping an eye on. Discuss amongst yourselves…