From Jeff Matthews:
Tuesday, January 6, 2008: Dow Chemical admitted today that roughly 4,500 workers are being laid off in order to help pay the cost of acquiring Rohm & Haas at a price that makes no economic sense…
Actually, we made that up. Dow Chemical admits no such thing.
The company, which in July agreed to buy specialty chemical maker Rohm & Haas at a pre-Credit Crisis valuation of $15.4 billion—more than Dow’s current $14 billion market value—recently received a shock when Kuwait exercised economic prudence by backing out of a $9 billion joint venture that no longer made sense, thus depriving Dow of money to pay for Rohm & Haas.
So today, Dow released a whopper of a rationalization for not excercising its own economic prudence, in the form of a press release that begins as follows:
The Dow Chemical Company (NYSE:DOW) today announced a wide range of legal, operational and financial actions that will keep the Company on track to fulfil the transformational corporate strategy Dow has pursued since 2005.
Dow’s strategy will continue to involve aggressive steps to establish Dow as a high-performance, earnings growth company organised around a strong portfolio of joint ventures and market-facing performance business divisions. Central to Dow’s strategy is its commitment to retain a strong investment grade rating and to maximise shareholder return.
If that last sentence is suppposed to bear any semblance to reality, how is it possible that Dow continues to pursue the acquisition of a chemical company at a pre-Credit Crisis price which even Wall Street’s Finest consider to be as much as, oh, a third too rich?
Well, one way is layoffs, as today’s press release trumpets:
Since the onset of the global financial crisis in September 2008, Dow has taken aggressive actions to reduce capital spending, working capital and operating expenses. With further weakening in the global economy, Dow announced a restructuring in December which will reduce the Company’s workforce by approximately 11 per cent, close facilities in high-cost locations and divest several non-strategic businesses. “We undertake actions like these with a very clear outcome in mind — to preserve our financial flexibility and improve our financial performance.
In other words, “We’re Firing 4,500 Workers So We Can Make a Stupid Acquisition.”
Why can’t they just say it?