Bidding For Pzz

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Executive Summary The case refers to Dow Chemical’s bid for the privatization of Petroquimica Bahia Blanca S.A. (PBB) in 1995. PBB a producer of both Ethylene and Polyethylene was being privatized by the Argentine government. Ethylene produced from Oil or natural gas, was used to produce Polyethylene, the world’s most widely used plastic. Dow Chemicals generated revenues of approximately $20 billion from its 3 major businesses: Chemicals, Plastics and Agricultural products. Dow held the leading market position in numerous chemical product lines including Ethylene and Polyethylene. Dow’s upper management in Latin America, including Oscar Vignart, anticipated continued improvement in standard of living, leading to increased demand for polyethylene in Argentina. Food & packaging industries and supermarket sectors had experienced dramatic growth since 1991. This expected growth in Polyethylene demand made PBB a potentially attractive acquisition. The case discusses Dow Quimica Argentina’s valuation for the bid for PBB in the privatization and also development of an overall, three stage strategy for development of polyethylene business in Argentina. Dow values the project step by step by building a cash flow model and then running sensitivity analyses. Even though there were many uncertainties and potential risk, Dow viewed the acquisition as their chance to become the number-one player in the Latin American polyethylene industry. We recommend that Dow should acquire PBB because the acquisition of PBB offers Dow once in the life time the opportunity to become the leading polyethylene player in Latin America. Introduction Dow had long been interested in expanding its interests in Argentina. In the late 50’s Dow urged the Argentine government to develop a petrochemical complex. In 1977 the government began development of the complex in association with local

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