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Dow Says Cost of Buffett Exit Doesn’t Suit Shareholders

Dow Chemical Co. Chairman Andrew Liveris had been working to reduce debt after receiving $2.19 billion from Petrochemical Industries Co. of Kuwait as compensation for the cancellation of a joint venture more than four years ago. Photographer: Jonathan Alcorn/Bloomberg
Dow Chemical Co. Chairman Andrew Liveris had been working to reduce debt after receiving $2.19 billion from Petrochemical Industries Co. of Kuwait as compensation for the cancellation of a joint venture more than four years ago. Photographer: Jonathan Alcorn/Bloomberg

Dec. 3 (Bloomberg) -- Andrew Liveris, the chairman and chief executive officer of Dow Chemical Co., said he’s not going to be hurried into paying too much to redeem $3 billion of convertible preferred shares held by Warren Buffett.

“The premium for exit right now doesn’t suit our shareholders,” Liveris said yesterday in an interview at Bloomberg’s headquarters in New York.

Dow pays an 8.5 percent annual dividend on the preferred shares that Buffett bought in 2009. The funds helped Midland, Michigan-based Dow acquire Rohm & Haas Co. when access to capital was tighter.

Falling interest rates since then made it attractive for Goldman Sachs Group Inc., General Electric Co. and Mars Inc. to pay premiums to exit investments that Buffett made in 2008. His Omaha, Nebraska-based Berkshire Hathaway Inc. got at least 10 percent a year through deals with those companies.

Liveris had been working to reduce debt after receiving $2.19 billion from Petrochemical Industries Co. of Kuwait as compensation for the cancellation of a joint venture more than four years ago. He said last year that preferred shares were among the securities he would consider targeting.

Dow slipped 3.2 percent to $38.72 at 4 p.m. in New York today. The company has rallied 20 percent this year after gaining 12 percent in 2012.

Berkshire’s preferred stake can be converted to 72.6 million shares of Dow common stock for $41.32 each. Starting in April 2014, Dow has the right to swap the investment into common stock if its shares trade above $53.72 for any 20 trading days in a consecutive 30-day window.

Ride Up

“It’s worth the ride up, so he’ll stay,” Liveris said of Buffett. “We don’t spend mindspace on this. Once a quarter or so, we have a conversation, and then we move on.” Buffett, 83, didn’t respond to a request for comment left with an assistant.

Dow said last month it would repurchase $700 million of bonds that cost as much as 6 percent after initially offering to redeem $500 million of notes maturing in 2017 and 2018. Liveris had reduced debt by $2.4 billion this year through Oct. 30, lowering interest expense by about $120 million, the company said in a statement.

“We don’t have to do any more debt reduction,” Liveris said. “What we have to do is take more costs off the balance sheet, take off expense.”

To contact the reporters on this story: Diane Brady in New York at dbrady11@bloomberg.net; Alexandria Baca in New York at abaca3@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; Simon Casey at scasey4@bloomberg.net

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