Dow Completes Acquisition of Rohm and Haas

Dow Completes Acquisition of Rohm and Haas, Creating a Leading Global Specialty Chemicals and Advanced Materials Company

The Dow Chemical Company today announced that it has completed its acquisition of Rohm and Haas. The acquisition is a major step in Dow's strategy of growing its performance products and specialty portfolio to deliver more consistent earnings growth. Combining the two organizations' best-in-class technologies, broad geographic reach and strong market channels will create a $14.0 billion diversified business portfolio, which will be called Dow's Advanced Materials division. The division is intended to achieve $3.0 billion in additional value growth opportunities, as well as annual cost synergies of $1.3 billion.

Rohm and Haas is the key element in Dow's new Advanced Materials division. Pierre Brondeau has been named president and CEO of this division, which includes: Coatings, Building and Construction, Specialty Materials, Adhesives and Functional Polymers, and Electronic Materials.

Continued Progress on De-leveraging

Dow has decided to exercise its option to have the Haas Family Trusts make an additional $500 million investment in Dow equity. This is consistent with Dow's disciplined plan to retire the bridge loan for the financing of the Rohm and Haas transaction by the end of 2009. This will be accomplished through the sale of assets, issuance of equity and debt, and the previously announced reduction in the Company's dividend to preserve cash.

Regulatory Approvals

On January 23, 2009, Dow entered into a consent order with the United States Federal Trade Commission (FTC) that permitted the completion of the acquisition, provided that certain actions to address potential anticompetitive effects are implemented within 240 days of the deal closing. Specifically, under the terms of that agreement, Dow is required to divest the following businesses:

- Clear Lake, Texas, acrylic acid and esters plant and the related glacial acrylic acid, butyl acrylate, and ethyl acrylate businesses in North, Central, and South America

- UCAR Emulsion Systems specialty latex businesses in North America

- North American hollow plastic pigment business (also referred to as the hollow sphere particle business)

The consent order also includes an Order to Hold Separate which requires Dow to maintain the competitiveness of these businesses pending their divestiture and to ensure that confidential information is not transferred between these businesses and the other businesses of Dow.

Dow has already initiated procedures to comply with the FTC consent order and has been actively seeking buyers for the impacted businesses. The acquisition previously received regulatory clearance from the European Commission on January 8, 2009.

Effective today, Rohm and Haas common stock will cease trading.

quoted from: New Kaznak

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Dow Chemical Buys Rohm and Haas

Dow Chemical completed its more than $15bn acquisition of Rohm and Haas on Wednesday, and immediately sold off Morton Salt as part of a plan to scale back debt stemming from the merger.

Rohm and Haas is the key element in Dow's new advanced materials division, which will be headed by Pierre Brondeau as president and chief executive, Dow said.

The division, which includes coatings, building and construction, specialty materials, adhesives and functional polymers, and electronic materials, is intended to achieve $3bn in additional value growth opportunities, as well as annual cost synergies of $1.3bn.

Right away, Dow sold the Rohm and Haas salt business, Morton Salt, to Germany's K+S AG in a deal that it expects to close in mid-2009.

The sale is part of a plan by Dow to lower its debt, which has become an issue for some investors and analysts with the acquistion of Rohm and Haas.

"We are pleased that we reached an agreement with K+S at an attractive value in such a short period of time," Dow chief executive Andrew Liveris said in a statement. "This sale puts us ahead of schedule on our deleveraging plan post the close of the Rohm and Haas acquisition.

Earlier Wednesday, Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on Dow Chemical to the lowest investment grade, BBB-minus, from BBB and left the company under review for further downgrade.

"We believe the [Rohm and Haas] transaction is an important strategic initiative for Dow ... but it will meaningfully stretch the financial profile to a level beyond what we consider consistent with the former ratings," said S&P's credit analyst Kyle Loughlin.

Dow is likely to sell other businesses, either to deleverage or appease anti-trust regulators. Indeed, the company said it has moved to comply with a Federal Trade Commission order to divest several assets and has been actively seeking buyers for the affected businesses.

The company said the FTC required it to divest its Clear Lake, Texas, acrylic acid and esters plant and the related businesses in North, Central, and South America.

It is also selling the UCAR Emulsion Systems specialty latex businesses in North America and the North American hollow plastic pigment business.

Dow also said it has decided to exercise its option to have the Haas Family Trusts make an additional $500m investment in Dow equity. This is consistent with Dow's plan to retire the bridge loan for the financing of the Rohm and Haas transaction by the end of 2009.

This will be accomplished through the sale of assets, issuance of equity and debt, and the reduction in the company's dividend to preserve cash.

On 9 March, Dow Chemical agreed to go through with its purchase of Rohm and Haas, reaching a settlement after the two sides were scheduled to go to a trial over Dow's refusal to close the deal.

The companies said Rohm and Haas shareholders would receive just less than $79 a share – $78 a share, plus a ticking fee agreed upon in the original deal.

Rohm and Haas stock, which was to cease trading on the New York Stock Exchange Wednesday, finished up 10¢ at $78.94. Dow Chemical stock closed 4.5% higher at $8.81.

By Steve James and Paul Thomasch, Reuters.
quoted from: Chemicals Technology

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Wall Street Cold on Dow/Rohm and Haas Deal

NEW YORK (ICIS news)--Dow Chemical’s settlement to acquire Rohm and Haas for $78/share (€62/share) in the form of cash and preferred shares was underwhelming, considering the high price, potential dilution to Dow shareholders and cost of servicing the preferred stock, Wall Street analysts said on Tuesday.

“In a game of brinksmanship, Dow may have blinked by agreeing to go through with the overvalued $78/share acquisition of Rohm and Haas,” said BB&T Capital Markets analyst Frank Mitsch.

Dow's settlement followed a suit filed in Delaware Chancery Court by Rohm and Haas, which wanted Dow to complete the deal. Judge William Chandler III oversaw the case. 

“We’re not quite sure that the apparent concessions received were not worth casting aside and forcefully presenting its case to Judge Chandler,” he added.

Oppenheimer analyst Edward Yang said Dow is paying roughly 3-6 times fair value for Rohm and Haas.

“We had wrongly believed that they would renegotiate the price,” Yang said.

On 9 March, Dow agreed to close its acquisition of Rohm and Haas by 1 April. As part of the agreement, two of Rohm and Haas’s largest shareholders – the Haas Family Trusts and Paulson & Co – have agreed to buy $2.5bn in perpetual preferred equity in Dow. In addition, the Haas Family Trusts have agreed to buy an additional $500m in Dow common stock, at Dow’s option.

Dow is essentially paying the equivalent of $63/share in cash and $15/share in preferred stock, the company said. Dow will also pay the 8% annualised ticking fee to Rohm and Haas shareholders, costing it roughly $275m.

Mitsch called the deal “clearly dilutive” to Dow shareholders.

“Our back-of-the-envelope calculation of dilution is around $0.40/share in year one,” he said.

“This doesn’t take into account the greater dilution that we believe could come if Dow reports big earnings, as its share count could significantly ramp up as the $500m in potential common stock finds its way to the Haas family, and the $550m in stock goes to the Rohm and Haas ESOP [Employee Stock Ownership Plan], which at $6/share, in total would add around 10% to the shares outstanding,” Mitsch added.

Dow is already issuing $3bn in preferred stock to Warren Buffet’s investment vehicle, Berkshire Hathaway, and $1bn in preferred stock to the Kuwait Investment Authority (KIA).

Mitsch noted that the preferred stock payments and interest payments on debt could amount to about $1.4bn/year for Dow.

JPMorgan analyst Jeffrey Zekauskas called Dow’s settlement a “Pyrrhic victory”.

Additional costs connected to the transaction, including the ticking fee and the funding of the Rohm and Haas ESOP will raise the cost of the acquisition by an additional $1bn to about $19.3bn, representing a multiple of 16.1 times estimated 2009 Rohm and Haas earnings before interest, tax, depreciation and amortisation (EBITDA), Zekauskas said.

Deutsche Bank analyst David Begleiter said he does not expect value creation from the deal until the seventh year after closing.

He lowered his 2009 earnings per share estimate on Dow from 50 cents to breakeven, and cut his 2010 estimate in half to $1.00.

However, Buckingham Research analyst John Roberts said there is “substantial long-term value in Dow stock, which is at levels last seen in the early 1980s, and first seen in the early 1970s”.

Dow’s annualised dividend of 60 cents, which represents a yield of nearly 9%, is “fairly secure”, Roberts said.

Shares of Dow were up 33 cents, or 5%, to $6.66 in Tuesday afternoon trading.

quoted from: www.ICIS.com

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US Dow to Close Rohm and Haas Deal for $78/Share

HOUSTON (ICIS news)--US major Dow Chemical will buy Rohm and Haas for $78/share (€61.62/share) as part of a settlement reached by the two sides on Monday, Dow said. 

The settlement matches Dow's initial offer for the company. However, Dow restructured the composition of the deal. 

Under the restructured terms, the two largest shareholders of Rohm and Haas have agreed to buy $2.5bn in preferred equity to be issued by Dow, the company said. 

Also, the Haas Family Trusts could make an investment in an additional $500m of Dow equity, the company said.

As such, Dow will now pay $63/share in cash and $15/share in preferred equity securities, the company said. 

Dow's financing will also include a $3bn investment from Berkshire Hathaway and $1bn by the Kuwait Investment Authority (KIA), the company said. Other sources include a $12.5bn bridge loan. 

The two companies could raise another $4bn from selling off businesses and stakes, Dow said. 

These divestments will help offset a cash shortfall caused by the collapse of another deal, Dow's joint venture with Petrochemical Industries Co (PIC) of Kuwait. Dow would have received $9bn from the deal.

The divestments include Dow's 45% stake in Total Raffinaderij Nederland NV, a Dutch petroleum refining partnership, the company said. Dow will also sell some of its equity stakes in its olefins and derivatives business in SE Asia. 

Rohm and Haas will sell its Morton Salt division, Dow said. 

In addition, Dow and Rohm and Haas plan to sell of $4bn worth of businesses and stakes. 

Rohm and Haas sued Dow in Delaware Chancery Court, after the company missed a 27 January deadline to close the merger. 

Dow now has a 1 April deadline to close the deal, the company said.

quoted from: www.ICIS.com

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Rohm and Haas Fourth-Quarter Earnings Tumble

Chemical maker Rohm and Haas, which is locked in a merger dispute with suitor Dow Chemical, said on Monday its fourth-quarter profit fell as the global economic slowdown hurt demand for its paints, coatings and electronic materials.

Net income in the quarter was $32m, or 17 cents a share, compared with a year-ago profit of $180m, or 91 cents a share.

Excluding items, the company posted earnings of 69 cents a share, down from 90 cents a share, a year earlier.

Dow, in July, agreed to acquire rival Rohm and Haas for $15.3bn, in a bid to expand its speciality chemicals business.

But last month Dow said it would not close the deal on schedule in light of deteriorating economic conditions and the failure of a key joint venture – the proceeds of which were to fund the Rohm and Haas deal.

Rohm and Haas has sued Dow in a bid to force the largest US chemical maker to close the deal.

By Euan Rocha, Reuters.
source: http://www.chemicals-technology.com

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Rohm and Haas Wins Right to Trial in Row with Suitor

Dow's decision to back out of acquisition going to court
By Dave Hannon -- Purchasing, 1/28/2009 9:23:00 AM

Rohm & Haas’ has received approval for a speedy trial in its lawsuit with Dow Chemical after Dow missed its deadline to close on its acquisition of Rohm & Haas. Chemcial giant Dow announced Monday it would not be able to close the deal this week, as scheduled. In a statement, CEO Andrew Liveris said Dow “remains interested in discussions to find a solution to complete the acquisition of Rohm and Haas, but recent events have made closing untenable at this time.”

Dow pointed to the macroeconomic trends and last month's implosion of Dow's planned $17.4 billion joint venture with Petrochemicals Industries Company of Kuwait (PIC) as reasons for tabling the Rohm & Haas deal. As reported on Purchasing.com, Kuwait’s Supreme Petroleum Council chose to pull out of a joint venture with Dow Chemical called K-Dow, and Dow is pursuing its own legal fight on that front.

“The world has changed significantly and we still do not see the bottom of this unprecedented demand destruction which only accelerated through the fourth quarter and brought December operating rates to historic lows,” Liveris said in the statement.

 According to Dow Jones Newswires, Rohm & Haas contends in the suit that Dow engaged in “surreptitious, wrongful and deliberate efforts” to delay antitrust clearance of the merger. Dow Jones also reports that Liveris met with Rohm & Haas executives last week and asked for an extension until June 30 to close the deal. But Liveris refused to commit to going through with it even if Rohm & Haas granted the extension, the suit contends. Last week, Rohm & Haas said it was cutting 5.5% of its workforce.

source: www.purchasing.com

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Dow Chemical Confirms Rohm and Haas Acquisition Will Not Close On or Before January 27, 2009

The Dow Chemical Company (NYSE:DOW) confirms it has informed Rohm and Haas that Dow will not close the proposed acquisition on or before January 27, 2009. 

Dow has determined that recent material developments have created unacceptable uncertainties on the funding and economics of the combined enterprise. This assessment is based on several macro-economic factors such as the continued crisis in global financial and credit markets combined with the dramatic and stunning failure of Petrochemicals Industries Company of Kuwait (PIC) to fulfill its obligation to complete the formation of the K-Dow joint venture in late December 2008.

 "Our long term strategy remains unchanged and the proposed acquisition of Rohm and Haas is consistent with this strategy," said Andrew N. Liveris, Chairman and CEO. Since Dow learned in late December of PIC's failure to close the K-Dow transaction, Dow has been aggressively engaged on multiple paths seeking ways to enable the Rohm and Haas transaction. Dow remains interested in discussions to find a solution to complete the acquisition of Rohm and Haas, but recent events have made closing untenable at this time.

"Dow Chemical has a long history of resiliency in responding to changing market conditions, and that resiliency continues," said Liveris, "but the world has changed significantly and we still do not see the bottom of this unprecedented demand destruction which only accelerated through the fourth quarter and brought December operating rates to historic lows. The Company's commitment to remain financially strong is part of the DNA of this 112-year old company."  

Dow previously announced a series of wide-ranging actions to address global economic conditions and is accelerating those actions based on continued deteriorating demand. "We are well-prepared to take the appropriate steps to ensure we retain our options and financial flexibility to see our way through what we anticipate will be an extremely challenging year," said Liveris.

source: http://kaznak.web.infoseek.co.jp

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FTC Intervenes in Dow Chemical's $18.8 Billion Acquisition of Rohm & Haas

Commission Order Requires Divestiture of Acrylics and Other Industrial Chemical Assets to Preserve Competition

Dow Chemical Company has settled Federal Trade Commission charges that its proposed $18.8 billion acquisition of rival chemical manufacturer Rohm & Haas Company would be anticompetitive and would violate federal law. Under the proposed consent order allowing the transaction to proceed, Dow will sell a range of assets to an FTC-approved acquirer, including its acrylic monomer, hollow sphere particle, and acrylic latex polymer businesses. Dow also must put procedures in place to ensure it does not have access to competitively sensitive non-public information regarding any businesses it acquires from Rohm & Haas.

“Dow and Rohm & Haas are direct and significant competitors in certain markets for acrylics and other industrial chemicals used to make coated paper products, paints, and adhesives,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The FTC consent order announced today will ensure that consumers continue to benefit from competition in the markets for these important products and will not face the prospect of higher prices as a result of the acquisition.”

According to the Commission’s complaint, Dow’s proposed acquisition of Rohm & Haas would reduce competition in the North American markets for the research, development, manufacture, and sale of certain acrylic monomers - including glacial acrylic acid, butyl acrylate, and ethyl acrylate - as well as hollow sphere particles and acrylic latex polymers for traffic paint used to mark lines on streets and highways.

Each of the relevant acrylic monomer products is made from crude acrylic acid. Glacial acrylic acid is used in the production of super-absorbent polymers which are used in personal care and hygiene products. Butyl acrylate and ethyl acrylate are acrylate esters used to make the latex polymers that are used in paints, architectural coatings, and pressure-sensitive adhesives. Hollow sphere particles are a type of specialty polymer used in the manufacture of coated paper to provide gloss, brightness, and opacity. Acrylic latex polymer for traffic paint is a quick-drying polymer used to mark highway traffic lines. 

The FTC contends that each of the relevant product markets is highly concentrated and that the proposed acquisition would lead to fewer competitors in each market. For the acrylic monomer markets, the deal would reduce the number of significant competitors from four to three, with the combined Dow/Rohm & Haas having a significant share of each market. The combined firm would have a more than 40 percent share in the market for glacial acrylic acid; a nearly 75 percent share in the market for butyl acrylate; and a nearly 90 percent share in the market for ethyl acrylate. The markets for hollow sphere particles and acrylic latex polymer for traffic paint are even more concentrated, the complaint states, as Dow and Rohm & Haas currently are the only two suppliers. In those markets, the proposed acquisition would be a merger to monopoly.

Finally, the complaint alleges that the proposed acquisition would eliminate direct and substantial competition between Dow and Rohm & Haas in the relevant markets, reducing competition and increasing Dow’s ability to exercise market power unilaterally. The complaint also alleges that the proposed transaction would increase the likelihood of coordinated interaction for glacial acrylic acid, butyl acrylate, and ethyl acrylate. New entry or fringe expansion in these markets is unlikely to counteract the alleged anticompetitive impact of the acquisition.

The FTC’s order is designed to remedy the anticompetitive impacts of the proposed transaction. It requires Dow to divest a single part of its acrylic monomer and polymer research and development and production assets to a Commission-approved buyer. These assets include: 1) Dow’s acrylic monomer production facility in Clear Lake, Texas; 2) its acrylic polymer production assets in St. Charles, Louisiana; 3) its acrylic polymer production facility in Alsip, Illinois; 4) its acrylic polymer production facility in Torrance, California; 5) its acrylic monomer research and development group in South Charleston, West Virginia; 6) its acrylic latex polymer research and development group in Cary, North Carolina; and 7) other assets related to these businesses. The divestitures will include all of the technology related to these businesses, and the order also will require Dow to licence any intellectual property to the acquirer that is not directly related to, but is used in, those businesses.

To ensure the successful transition of the acrylic monomer and polymer assets and the viability of the acquirer, the order requires Dow to provide certain input processes and transition services to the acquirer for a short time. The order also requires Dow to continue to provide the acquirer with site services related to the acrylic polymer production assets in St. Charles, Louisiana, where the acquirer will be operating a separate business on the grounds of a larger Dow facility.

The consent order remedies the competitive impact in the markets for hollow sphere particles and acrylic latex polymer for traffic paint by requiring Dow to sell intellectual property primarily used to make these products and to license certain other intellectual property. Dow also must supply hollow sphere particles and acrylic latex polymer for traffic paint to the acquirer at its manufacturing cost, until the buyer can develop its own manufacturing processes.

Next, the order requires Dow to put procedures in place to ensure that it does not have access to any competitively sensitive information obtained from the businesses and facilities to be divested or to use any information it already has in an anticompetitive matter. Further, the order will allow the FTC to appoint an interim monitor to ensure Dow complies with its obligations. If Dow does not sell the assets it is required to divest within 240 days of when the consent order is accepted for public comment or 240 days from the acquisition date, whichever is later, a Commission-appointed divestiture trustee may sell the assets on its behalf. The order also contains reporting and record keeping requirements to ensure Dow’s compliance with its terms. 

The Commission vote to accept the complaint and consent order and place copies on the public record was 4-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The complaint, consent order, and an analysis to aid public comment can be found now on the Commission’s Web site at http://www.ftc.gov/os/caselist/0810214/index.shtm. 

The agreement will be subject to public comment for 30 days, beginning today and continuing through February 23, 2009, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. 

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

source: http://kaznak.web.infoseek.co.jp

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Rohm & Haas to Cut 5.5% of Workforce

By Maria Varmazis -- Purchasing, 1/21/2009 11:45:00 AM

Following labor cuts of about 900 employees in June 2008, Rohm & Haas this week announced it will cut an additional 900 employees, freeze employee salaries and shut down “underutilized” plants in an effort to reduce costs and save approximately $90 million. The Philadelphia-based chemical company says the cost-cutting measures are needed given its pending acquisition by Dow Chemical as well as the market downturn and slumping chemical demand. The company has not yet disclosed specifically which plants it aims to idle or shut down.

“We will continue to aggressively protect our company from the challenges of deteriorating market conditions and a weakening economy," says CEO Raj L. Gupta, in a statement. The actions “are intended to adjust our operations to current business conditions, which reflect softening markets worldwide," says Pierre Brondeau, president of Rohm & Haas, in a statement. "We will continue to control costs in order to compete effectively, while preserving our capacity to accelerate performance when markets recover.” 

Dow Chemical was supposed to buy Rohm & Haas for $15.3 billion, but was put on hold after a Kuwaiti company backed out of a $17.4 billion joint venture just days before it was to close. Dow had counted on using some of that money to fund the acquisition of Rohm & Haas. Analysts tell the International Herald Tribune that the cuts by Rohm & Haas are just the latest signs of trouble in the chemical sector, and are not tied to the deal with Dow. “I don't think this is company specific," says Dmitry Silversteyn of Longbow Research. “This is a response to a tough environment.”

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