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Dow, Rohm & Haas Reach Deal (Update)

Wednesday, March 11, 2009

Dow Chemical Co. has reached a tentative deal to complete its disputed $15 billion buyout of Rohm & Haas. The combined company will shed more jobs than originally planned and freeze salaries this year. The deal went forward at the original purchase price of $15.3 billion in cash, or $78 a share, after Rohm’s two largest shareholders agreed to put up $3 billion to help close it.

The agreement was a big win for Rohm & Haas shareholders, who get a rich price for their stock, and gives beleaguered Dow Chemical some breathing room.

The merger must close on April 1, according to the settlement approved Monday by Delaware Judge William B. Chandler III. The agreement also settles the lawsuit Rohm & Haas filed in late January, seeking to force Dow Chemical to honor its disastrously timed July merger agreement.

Dow had eagerly wooed Rohm & Haas because it wanted the company's highly profitable specialty chemical products, such as paint additives. Rohm & Haas came on the market when the Haas family decided to diversify the assets in its family and charitable trusts. Dow is based in Georgetown, Del.; Rohm & Haas is based in Philadelphia.

Dow first announced the deal last summer, but the recessionary economy has severely hurt its business since then. Late last year, a Kuwaiti company pulled out of a joint venture from which Dow expected more on than $7 billion in cash. The company also cut its dividend for the first time to preserve cash.

The breakthrough in the dispute came with a cash infusion from the Haas trusts in Philadelphia and hedge-fund operator John Paulson. Warren Buffett's Berkshire Hathaway previously announced it would invest $3 billion to help Dow complete the deal; the Kuwait Investment Authority will put up $1 billion.

After Monday’s proceedings, Dow announced that it would cut 3,500 new jobs on top of the 6,000 combined job cuts previously announced. Dow chief executive Andrew Liveris also said Dow was reconsidering its pledge to keep Rohm & Haas intact in Philadelphia as Dow's specialty chemicals divisional headquarters.

Rohm & Haas employs 15,500 people, 3,000 in the Philadelphia area

"The next three weeks will have to drive how we put this together," Liveris said.

Dow shares fell 78 cents, or 11 percent, to $6.33, on news of the agreement; shares of Rohm & Haas rose $10.20, or 16 percent, to $74.

Sources: philly.com, Associated Press