Dow Buys Rohm & Haas for $15.3 B

123jump.com Staff
10 Jul, 2008
New York City

Dow Chemical agreed to pay 74% premium to acquire specialty chemical maker Rohm & Haas valued at $18.8 billion. Berkshire Hathaway will invest $3 billion and Kuwait Investment Authority will purchase $1 billion of convertible preferred securities. The rest of the deal will be funded with debt arranged by Merrill, Citigroup and Morgan Stanley. Rohm & Haas will operate as an independent division with sale of $13 billion after the merger.

[R]10:30AM New York – Rohm & Haas agrees to be acquired by Dow Chemical at $78 per share.[/R]

Dow Chemical has agreed to acquire Rohm & Haas for $78 per share, at 74% premium from yesterday’s close. The chemical company will diversify its revenue that includes higher margin products such as adhesives, paint ingredients and reduce cyclicality in its business.

The boards of both companies have unanimously approved the deal and needs approval from Rohm & Haas shareholders and regulators. The companies expect the transaction to be completed in the first quarter of 2009.

Berkshire Hathaway and Kuwait Investment Authority will invest $3 billion and $1 billion in convertible preferred securities. Citigroup, Merrill Lynch and Morgan Stanley will provide additional debt financing for the $15.3 billion all cash deal.

Last December Dow and Petrochemical Industries Company of the State of Kuwait formed a joint venture to design and make higher margin advanced chemical products.

The transaction, coupled with the pending joint venture between Dow and PIC, will increase the pro forma 2007 EBITDA contribution from Dow’s Performance businesses to 67% from 52%. The merged companies expect to save $800 million before taxes on lower raw materials cost and reduced corporate overhead.

Dow will expand its board and include two board of directors form Rohm Haas to fourteen.

Dow Chemical based in Midland, Michigan has annual sales of $54 billion and employs 46,000 people and Rohm & Haas based in Philadelphia, Pennsylvania has annual sales of $8.9 billion and employs 16,500 people.

Rohm & Haas reported sales rise of 8% in 2007 to $8.9 billion and net earnings from continuing operations declined 13% to $660 million.

Rohm & Haas generated in 2007 23% of its sales from paint and coating materials, 20% from packaging and building materials and 12% from salt. The company purchased the Morton Salt Company in 1999.

Rohm & Haas was started by Dr. Otto Rohm and Otto Haas in 1909 and grew rapidly during the World War II because of its success in leather tanning technology.