
Part of its acquisition of specialty chemical maker Rohm & Haas means 3,500 workers there will lose their jobs. Midland-based Dow reached a tentative deal Monday to buy the Philadelphia-based chemical maker for $15 billion, averting a trial that was to begin today. Rohm & Haas had sued to force Dow to complete the acquisition.
It was better that both sides came to terms instead of relying on a judge, said Jonathan Gardey, executive vice president of Gardey
Financial Advisors, 100 Harrow in Saginaw Township.
"If the judge steps in, one side could be happy or neither could be happy with a decision," Gardey said.
Rohm & Haas shareholders still will get $78 per share, but the company's two biggest shareholders will not get a cash payout, a concession that allows Dow to take on billions less in debt than if the deal were to close under the original terms.
The Haas family trust and Paulson & Co. will take a $2.5 billion stake in preferred shares issued by Dow. In addition, the Haas family will make an additional investment of $500 million at Dow's option.
Dow may apply those funds toward the acquisition instead of drawing the
money down from an existing bridge loan. Dow still plans to draw as much as $10 billion from the loan.
Steve Anderson, branch manager and senior vice president of the Hilliard Lyons office at 4835 Towne Centre in Saginaw Township, said that had a judge released Dow from a signed contract because of poor
economic conditions, other corporations likely would have followed suit. As it is, both sides probably didn't get exactly what they wanted, he said.
"That's what a compromise is, when both sides are equally unhappy with the outcome," said Anderson, who manages about 100,000 shares of Dow stock for clients.
Anderson said some initial animosity may exist, but "these things patch up pretty quickly as everyone realizes that it was nothing personal."
Dow announced the original deal last summer, saying Rohm & Haas would provide a buffer against the volatility in commodity prices.
Rohm & Haas has a portfolio of chemicals used in high-end items such as perfumes and hull coatings for boats. Made in small batches, specialty chemicals bring high profits and are not as susceptible to volatile commodity
prices swings, like the chemicals Dow makes in huge quantities.
But a severe downturn in the economy already has forced Dow to shutter 20 plants and lay of 11 percent of its work force.
Rohm & Haas, which employs more than 16,500 workers at more than 100 facilities in 27 countries, has cut 900 jobs since the summer.
Part of Dow's problems come from the collapse of a major deal in December just days before it was to close. A Kuwaiti company pulled out of joint venture from which Dow expected more on than $7 billion in cash.
Dow cut its dividend for the first time in nearly 100 years.
Rohm & Haas shareholders will get the proceeds from a daily $3 million ticking fee that the original agreement required Dow to pay for not closing the acquisition after regulators approved it in mid-January.
The companies must complete the revised deal no later than April 1.
"The strategic benefits of the acquisition of Rohm and Haas have never been in question; just the path to completing the deal," Dow head Andrew Liveris said.
Shares of both companies were suspended in afternoon
trading with a deal imminent.
Dow shares fell 78 cents to $6.33; shares of Rohm & Haas rose $10.20 to $74.
Warren Buffett's Berkshire Hathaway previously announced it would invest $3 billion to help Dow complete the deal, and the Kuwait Investment Authority it putting in another $1 billion.
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