February 2, 2009

Volume 87, Number 05

p. 9

Acquisition

Dow, Rohm And Haas Deal Gets Ugly

Rohm and Haas says a deal is a deal, despite Dow's woes

Alexander H. Tullo

ANOTHER Dow Chemical deal is in trouble. The Midland, Mich.-based chemical giant says it didn't close its $15 billion acquisition of Rohm and Haas by the deadline the parties had agreed to for completing the transaction. Rohm and Haas has responded by suing Dow to force it to consummate the deal, which was announced last July.

Peter Cutts Photography

Liveris

Rohm and Haas

Gupta

Rohm and Haas says that under the agreement, Dow was obligated to close the deal two business days after all conditions were met. The final obstacle was Federal Trade Commission (FTC) clearance, which was granted on Friday, Jan. 23, and requires Dow to sell off some acrylics operations. On Monday, Jan. 26, Dow announced that it wouldn't complete the transaction the following day.

Dow blames its failure to close the deal on the global financial crisis and another failed deal: the sale of half of its commodity chemical and plastics business to Petrochemical Industries Co. of Kuwait (C&EN, Jan. 12, page 8). That deal would have given Dow some $9 billion in pretax revenues to help pay for Rohm and Haas.

In an interview last week with the financial news channel CNBC, Dow CEO Andrew N. Liveris stressed that he would like to conclude the deal eventually but can't just yet. "It would be foolhardy to put these two companies together and create an economic disaster for the combination," he said.

Rohm and Haas filed its lawsuit with the Delaware Court of Chancery, the same court that last year heard Hexion Specialty Chemicals' plea to get out of its purchase of Huntsman Corp., also for economic reasons. In that case, the court ruled that Hexion would face substantial damages if it didn't close the transaction, and the two parties ultimately settled for $1 billion. The trial in the Rohm and Haas case is set to begin on March 9.

In its filing, Rohm and Haas said Dow's excuses are irrelevant. "By July 2008, the credit markets were already in turmoil, and the risk that the U.S. and world economies could be entering a deep and prolonged recession was widely acknowledged," the suit said. Moreover, Rohm and Haas said, Dow has secured $17 billion in financing to complete the purchase, $2 billion more than is needed.

Joel I. Greenberg, a partner with the law firm Kaye Scholer, says that unlike in the Huntsman case, the Rohm and Haas merger agreement allows the Delaware court to compel Dow to close the deal. "The Delaware courts are likely to be willing to order a party to complete the deal if that is what the contracts tell them to do," he says.

Rohm and Haas added that Dow's Kuwaiti deal was not a condition to its acquisition, something that both Liveris and Geoffery E. Merszei, Dow's chief financial officer, acknowledged to analysts when the Rohm and Haas deal was originally announced.

Rohm and Haas's suit paints Dow as desperate to delay the transaction. The Philadelphia-based firm says Liveris personally visited three FTC commissioners seeking a delay in their approval of the merger to buy more time.

In mid-January, after Rohm and Haas executives learned about his efforts, Liveris and Rohm and Haas CEO Raj Gupta met in Philadelphia. According to Rohm and Haas, Liveris asked Gupta to allow the deadline for closing the merger to slide to June 30, a request Gupta denied.

Chemical & Engineering News

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