UPDATE 1-Dow's Styron unit attracts private equity-sources

Mon Jan 11, 2010 3:52pm EST

* Bidders for Styron asked to reconfirm interest Monday

* A number of private equity firms interested

* Dow says on pace to sell the unit in first quarter

(Add quotes from November conference call, byline)

By Megan Davies and Michael Erman

NEW YORK, Jan 11 (Reuters) - Bidders for Dow Chemical Co's (DOW.N) Styron unit have been asked to reconfirm their interest on Monday in order to narrow the field of buyers, sources familiar with the matter said.

Dow, the No. 1 U.S. chemicals company, put Styron up for sale in July and said at the time the unit could fetch $1 billion to $2 billion. It hopes to sell the unit, which makes polystyrene, rubber and latex, by the first quarter of 2010.

Styron has mostly drawn interest from private equity firms, including Bain Capital, TPG Capital LP [TPG.UL], Apollo Management LP [APOLO.UL] and investment firm Rhone, among others, the sources said.

There is also some strategic interest -- meaning from bidders in the same sector, rather than private equity firms.

Dow spokesman Bob Plishka told Reuters on Friday that Dow was still on pace to sell the business in the first quarter and acknowledged there was some strategic interest.

The company declined further comment on the sale.

"We are in discussions, both with financial as well as with strategic partners -- potential partners," Geoffery Merszei, executive vice president at Dow, said according to a transcript of a November conference call. "And I think we will be able to announce more on where we stand on the Styron divestiture by the next quarterly earnings announcement."

Dow's next earnings announcement is scheduled for February 2, according to its website.

Sources characterized Monday's deadline as narrowing the field of bidders before setting a deadline for second round bids.

Extracting the business from Dow could be a difficult process for a buyer, sources said, because Styron has numerous contracts with the unit as both a supplier and a customer.

Renegotiating these contracts will be a substantial and lengthy part of the process, and is one reason why the firm is looking to reduce the number of bidders.

Rhone, which has offices in London, Paris and New York, was one of the firms that bought Alcoa's (AA.N) specialty chemicals unit in 2004. Apollo has invested in Berry Plastics and specialty chemicals firm Hexion; while Bain has invested in chemicals companies including Brenntag and Innophos Holdings.

Deutsche Bank and HSBC are advising Dow on the sale.

Bain, TPG, Apollo, Rhone, Deutsche and HSBC declined comment. (Reporting by Megan Davies, Michael Erman; additional reporting by Ernest Scheyder; editing by Andre Grenon, Leslie Gevirtz)

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