PITTSBURG, Kan. — Dow Inc. announced Monday it will sell rail infrastructure assets and related equipment at six major North American sites to Watco Companies for more than $310 million.
"Today’s announcement is part of an on-going review of our ownership of non-product producing assets and is driven by our commitment to apply a best-owner mindset to everything we do," Dow Chairman and Chief Executive Officer Jim Fitterling said in a press release. "It aligns to Dow’s strategy to continue to grow our core businesses in a capital-efficient manner. The transaction will liberate cash from our balance sheet that we will use to pay down debt and invest in our core value-generating businesses."
Watco, a transportation service company founded in 1983 with nearly 5,000 employees worldwide in its operations in North America and Australia, including 266 in the Pittsburg area, where it is headquartered, will take over providing select rail services at two of Dow’s locations in Texas, along with two in Louisiana and two in Canada. Dow is North America’s largest olefins and polyethylene manufacturer, operating 109 manufacturing sites in 31 countries and employing approximately 36,500 people.
With so much disheartening economic news since the start of the coronavirus pandemic, both nationwide and locally, including last week’s announcement by NPC International that the company had filed for Chapter 11 bankruptcy, many area residents may be wondering about the financial health of larger companies that employ significant numbers of people locally.
Watco CEO Dan Smith said Monday, however, that the company has never been in a stronger financial position.
"I think these times have everybody wondering, you know, but I can just give you from our perspective, the Watco perspective, that we feel incredibly blessed and we’ve actually had record months — March, April, May and June — so it’s really been a phenomenal story for us," Smith said.
"We wouldn’t have been able to execute this transaction without, you know, that amazing understanding of just how strong our business is. So this is a very good sign for the economy, both locally and far away, and a sign that once we weather this storm, that things will continue to be bright for not only our industry but for most industries. You know, it’s been a remarkable few months with lots of adjustment and change in how we do things, but we’ve come through this process with a better understanding of just how strong the Watco team is."
The new acquisition of hundreds of millions of dollars worth of new assets in Freeport and Seadrift, Texas; St. Charles and Plaquemine, Louisiana; and Fort Saskatchewan and Prentiss in Alberta, Canada, will not have an impact on Watco’s commitment to keep the headquarters of its expanding operations in Pittsburg, Smith said.
"We’re proud to be here. I raised my kids here," he said. "We only intend to grow here in Pittsburg. We’re fully invested in the community and the surrounding communities. And I have a fifth grader in Girard and an eleventh grader at Girard and I can assure you I have no intentions of them going to school anywhere else."
Watco will partner with the transportation infrastructure group that manages Oaktree Capital Management, L.P.’s infrastructure investing strategy and funds to execute the transaction. Oaktree has been a Watco investor since December 2018.
"We appreciate Dow's belief in Watco, and we look forward to this long-term partnership," Josh Connor, managing director and co-portfolio manager of Oaktree's infrastructure investing strategy, said in a release. "Oaktree is extremely proud to be a part of the Watco family."