Dow Chemical’s Bid for the Privatization of Pbb in Argentina

International Finance Case Study

(Group-1, Sec A) (1) • • • Names of group members: Abhishek Singh (WMP6003) Abhishek Kumar (WMP 7005) Ankesh Goyal (WMP7012)

(2)

The case selected by the group: Dow Chemical’s Bid for the privatization of PBB in Argentina

(3)

A brief synopsis of the case:

This case is about Dow Chemical Company bidding for the acquisition of Petroquimica Bahia Balanca (PBB) in Argentina. PBB produced both ethylene and Polyethylene and it is owned by Argentina government. Due to opening up of Argentina Economy the PBB had to bow directly compete with Brazilian Petro chemical producers but the Technology & Scale of PBB was not in line with International Standards. Hence, Argentina Government decided to privatize the PBB. On the other hand the DOW Chemical sees it as an opportunity to become the leading poly ethylene player in Latin America due to the favorable economic & political conditions in Argentina.

(4) • •

The questions around which the group would organize its analysis: Is the Copesul/Perez Company is the serious bidder of PBB? How to Finance the acquisition of PBB?

• What are the relevant Political & Economic factors that are important in determining the country risk? • What should be the Price to Bid for PBB?

• What would be the complete valuation of the entire project in order to justify this investment by Dow Chemicals in Argentina?

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WMP 2011-14, T ERM 7

SUBMITTED BY- GROUP-1

P ROJECT REPORT – INTERNATIONAL FINANCE S ECTION -A

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Abstract What price should Dow Chemical bid for PBB, a petrochemical complex that is being privatized by the Argentine government? To answer this question, students are forced to consider the role of country risk, the underlying currency exposure of the business, and how to value an investment opportunity that has several stages. Given that it is a privatization, students are also forced to consider the political dynamics involved, the incentives of...