Dow Chemical CompanyTo the brink of junk and back

Michele Siuru

Scott Gossett

David StechlyJune 22, 2010

Presentation Agenda

• About Dow Chemical Company• Financial Profile: Dow Chemical & DuPont• Overview of 2008 Merger with Rohm & Haas• Post Acquisition Events & Capital Structure Impact

About Dow Chemical

• 1847; 1947• Midland, MI• Diversified Chemical Products Manufacturer• Dow operations are segmented into the following eight business

lines with 32% of revenues in the U.S., 33% in Europe and the remaining 35% in Rest of World

• Dow sales declined 30% from 2008 driven by declines of 17% in price and 13% in volume

• 2009 Restructuring Plan

- 2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000

200720082009

Dow Chemical & The Competition

Source: BigCharts

Dow & DuPont: Ratio Analysis

2005 2006 2007 2008 20090.0

2.0

4.0

6.0

8.0

10.0

12.0

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

9.919

8.771

7.955

2.838

1.274

7.586 7.698 8.880

6.6265.800

39.06%

34.05%

28.60%

40.40%

49.61%43.02% 43.19%

34.88%

56.34%59.28%

Dow & DuPont Debt Comparison

DOW TIE DuPont TIE DOW LTD-C DuPont LTD-C

Tim

es In

tere

st E

arne

d (O

I/IE

)

Long

-Ter

m D

ebt t

o Ca

pita

l (LT

D/C)

Dow & Rohm: A Bitter Pill to Swallow

• Details about Original Deal Terms• Purchase Price: $15.3bln• Financing Structure: $9bln cash; $6.3bln term-loan• Pre-Merger Debt to Equity: 54%

• What Happened• K-Dow• Threatened Debt Downgrade• Litigation

• Renegotiated Deal Terms• Purchase Price: $16.3bln• Financing Structure: $9.23bln term-loan; $7bln preferred issuance; Dividend Falls 64%• Post-Merger Debt to Equity: 70%

Dow: Debt Structure

Source: MorningStar

Dow’s Prescription: Deleveraging

Q1 Q3 Q12009

2010

• Dow/Rohm deal closes• Dow sells Morton Salts ($1.675bln)• Dow sells $210m for calcium chloride

businesses and $725m for Dow's stake in Total Raffinaderij Nederland N.V.

• Dow issues $2.25bln stock offering

Dow Total Debt / Capital

• Dow/Rohm Litigation • Dow issues $2.75bln of floating rate notes to repay bridge acquisition loan

• Dow sells Styron (Plastic/Rubber unit) to Bain Capital for $1.63bln

• Dow sells Chemical Powder Coatings business to AkzoNobel

47.61%

60.27%

57.13%

54.42%

56.82%

Dow Long Term Debt ($bln)

$10.9 $22.0 $20.6 $19.2 $18.83

Conclusion

• Capital Structure Continues Shift Away From Leverage.

• Less susceptible to insolvency due to decreased interest burden– Liquidity increases– Vital to success when facing cyclical exposure

• Stock price increases as firm follows capital structure plan– Risen 270% since close of acquisition