Mar 10, 2009

Tentative Deal Reached in Dow Chemical Buyout of Rohm & Haas

Companies agree to complete $15-billion transaction

Dow Chemical Co. has reached a tentative deal to complete its $15 billion buyout of Rohm & Haas Co., the Chicago Tribune reported.

As per the original terms, Rohm & Haas shareholders will receive $78 per share in cash, but in a concession that will allow Dow to take on billions less in debt, Rohm & Haas’ two biggest shareholders will not receive a cash payout. The Haas family trust and Paulson & Co. will take a $2.5 billion stake in preferred shares issued by Dow. The Haas family also will make an additional investment of $500 million at Dow's option, the newspaper reported.

Dow will be able to apply those additional funds toward the acquisition instead of drawing the money down from an existing bridge loan. The company will still draw as much as $10 billion from the loan.

The deal was first announced last summer, with Dow believing specialty chemical manufacturer Rohm & Haas would provide a safeguard against volatile commodity prices.

Rohm & Haas has a portfolio of specialty chemicals used in high-end items. These chemicals are made in small batches, bring high profits and are not as susceptible to volatile commodity prices swings, like the chemicals produced in large quantities by Dow.

The companies reached the deal after the start of a trial over litigation in the case was delayed for settlement talks. Dow did not to complete the all-cash purchase in January as planned, claiming the combined company would not be viable because of increased debt and slumping demand.

Days before a major deal was set to close in December, a Kuwaiti company pulled out of joint venture from which Dow expected more than $7 billion in cash.

Dow plans to cut 3,500 new jobs on top of 6,000 previously announced combined job cuts. All job cuts will be at Rohm & Haas, according to Andrew Liveris, Dow's chairman and chief executive.