The case is about Dow Chemicals’ bid for the privatization of Petroquimica Bahia Blanca (PBB). PBB, a producer of both Ethylene and Polyethylene in Argentina, is being privatized by the local government. Dow holds a leading market position in Ethylene and Polyethylene, and wants to utilize this opportunity to expand into Argentina. Dow has developed a three-stage operational strategy for expansion of its polyethylene operations in Argentina. The acquisition of PBB represents the first stage of the strategy and provides a gateway to the second and third stage. The cash flows from each stage of the project have been valued using the discounted cash flow (DCF) approach. The discount rate for the valuation has been adjusted for the country risk premium, and a modified version of CAPM has been used to calculate a best case and a worst case estimate of the discount rate. This gives us a range of possible acquisition values for PBB. Given that the acquisition also enables Dow to benefit from the from the high cash flows of the second and third stage of the project and that other parties are also interested in the acquisition, it is recommended that Dow bids a relatively high price of $280 million for PBB.
1. What do the underlying economics of this business look like?
2. How would you convince Dow headquarters to invest in this project?
3. How would you conduct a valuation of this project?
4. Justify the specific cash flows and the discount rate that you use in your analysis.
5. What would you bid for this project?
Case Study Solutions Write My assignment for money Write my Internship report Write my Research Essay Proof Reading Do my Homework Special Discounts for Students Exercise Solutions Write my Thesis Paper MBA Case Studies Matlab Assignments Financial Statement Analysis Economics Assignment Management Case Studies Solution Best Assignment Writing Company Webwork Assignments Blog Posts Harvard Case Studies Solutions Write my Personal Statement Application Essay