Dow Chemical Races Back

When Dow Chemical (NYSE:DOW) virtually turned itself inside out financially to complete its recent acquisition of Rohm and Haas, lots of folks turned on the company. The thinking was that, amid current market conditions, Dow had become too leveraged to qualify as a sensible investment.

But let's hope that crew of doubters didn't turn too far; the company is quickly making strides toward cleaning up its balance sheet and trimming non-strategic assets. Beyond that, it just might be that the chemical business, which has been hammered by the economic downturn, is beginning to show some sprigs of spring.

Fortunately for Dow, the capital markets are awake and functioning. Along with Microsoft’s (NASDAQ:MSFT) newly completed $3.75 billion debt issue and reports that Ford (NYSE:F) is planning a stock offering, Dow is following suit and capped off last week by issuing $6 billion in bonds and $2.25 billion in stock. The sales permitted it to pay back preferred stock issued to the Haas family and a hedge fund to get the Rohm and Haas acquisition done. Beyond that, it'll also pay back some short-term debt.

The company had also borrowed more than $9 billion to make the purchase after a joint venture deal with the Kuwaitis fell apart. Surprisingly, however, a deal has just been signed with the same Kuwait Petroleum that originally walked on Dow. It also involves Royal Dutch Shell (NYSE:RDS-A) and China Petroleum & Chemical Corp., and will lead to the construction of a refinery in China’s Guangdong province.

On Monday, the company announced that it might peddle its synthetic rubber business. That unit, which is based in Germany, is working with a bevy of tire companies on reducing rolling resistance, which would lead to a decrease in vehicle fuel consumption. A sale of the unit would follow a jettisoning of its Morton Salt unit. And if you listened to CEO Andrew Liveris on the company's recent conference call, a number of other units may be headed out the door as well.

With all this going on, it was encouraging to have Celanese (NYSE:CE) CEO David Weidman offer Monday that demand is slowly returning to the chemical industry. The weak economy has resulted in major operating income hits to the likes of large players DuPont (NYSE:DD) and Dow, along with smaller Eastman Chemical (NYSE:EMN) and Cytec Industries.

Back to Dow, my strong feeling is simply that this is a solid company whose management won't let grass grow under its feet. I'm watching it closely, and I hope my Foolish friends are also.

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