News

16 March 2009

 

Settlement agreed to close Dow’s acquisition of Rohm and Haas

The acquisition of Rohm and Haas Company of Philadelphia, PA by Dow Chemical Company of Midland, MI (announced last July) has been agreed for 1 April. The agreement resolves the litigation initiated by Rohm and Haas against Dow on 26 January with a resolution that is described as beneficial to both parties.

Dow (which had sales of $58bn in 2008 and 46,000 staff) reckons that the acquisition of Rohm and Haas (which has sales of $9.6bn in 2008) will make it the world’s leading specialty chemical and advanced materials company, combining the two organizations’ best-in-class technologies, broad geographic reach and industry channels to create a business portfolio with significant growth opportunities.

In particular, Dow says that Rohm and Haas provides an excellent position in industry segments that are poised for significant growth given long-term market trends, notably in the electronic materials market. Rohm and Haas's Electronic Materials division includes microelectronics technologies, such as providing precursors for metalorganic chemical vapor deposition.

“Rohm and Haas is a strong operational and strategic fit for Dow and is a critical component of the company’s long-term transformational strategy,” says Dow chairman & CEO Andrew N. Liveris.

Rohm and Haas’s two largest shareholders have agreed to purchase $2.5bn of perpetual preferred equity issued by Dow. Also, one of the shareholders, the Haas Family Trusts, has agreed (at Dow's option) to make an investment in an additional $500m of Dow’s equity. These equity investments substantially reduce the debt financing required to fund the acquisition. Dow has restructured the transaction to essentially pay the equivalent of $63 per share in cash, and $15 per share in face value of preferred equity securities.

“Dow has taken the time and steps necessary to close this transaction on substantially improved financial terms to the company, despite the continuing financial and economic uncertainty,” says Liveris. “The restructuring of the terms of the transaction allows Dow to maintain financial flexibility as we proceed to implement our strategy in a way that realizes the original promise of this acquisition... The strategic benefits of the acquisition of Rohm and Haas have never been in question; just the path to completing the deal,” he adds.

Dow has also put in place an even more aggressive plan to realize combined synergies of $1.3bn, up from the originally outlined $910m. Cost savings should come from increased purchasing power for raw materials for the combined firm; manufacturing and supply-chain work process improvements; office consolidations and the elimination of redundant corporate overhead for shared services and governance. Also, as part of the Dow’s plans to improve its financial position, it has started an aggressive asset divestment program (involving a number of Dow and Rohm and Haas business units) expected to yield about $4bn.

“By reaching agreement on the terms for this transaction, we have delivered excellent value to Rohm and Haas shareholders,” says Rohm and Haas’ chairman & CEO Raj L. Gupta.

See related items:

Dow acquiring Rohm and Haas for $18.8bn

Rohm and Haas launches enhanced version of MO precursor central delivery system

Rohm and Haas divests stake in precursor manufacturer UP Chemical

Search: Rohm and Haas Precursors

Visit: www.dow.com

Visit: www.rohmhaas.com