Monday, Rohm & Haas Co. (ROH) said its acquisition by The Dow Chemical Company will not be completed on or before Tuesday, January 27, 2009, a prime condition in the merger agreement, as intimated by the latter. Following the news, Rohm & Haas shares plunged over 14% on the New York Stock Exchange.
The deal was ratified by the European Union last month and got the nod from The Federal Trade Commission last Friday, triggering a two-business day time frame for conclusion.
In July last year, Midland, Michigan-based Dow inked a deal to buy out Rohm and Haas for $15.4 billion or $78 a share at a 74% premium with the hope of broadening its product offerings. Since the collapse of commodity prices and battering of the financial markets, there were questions lingering about the true value of the deal under the circumstances.
In the mean while, Dow's market capitalization dropped sharply to about $13.2 billion.
To make matters worse, Kuwait nixed the $17.4 billion joint venture with Dow's plastic division in December. Even though Dow refuted claims that it had pinned hopes on the deal for $7 billion in cash and fund the Rohm and Haas buy out. The collapse of the Kuwaiti deal and gloomy economic scenario has put the Rohm & Haas buyout in jeopardy.
Dow had hoped to finance the deal with a $13 billion bridge loan, a $3 billion equity investment by Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority. The acquisition would have made Dow the world's leading specialty chemicals and advanced materials producer.
Rohm and Haas at that time said it would work towards completing the proposed transaction with Dow in early 2009, and indicated that the Kuwait - Dow Petrochemicals deal was not a closing condition for the proposed merger with Dow.
As per the merger agreement, Dow will shell out about $3 million per day for every day delay in the event the deal is not closed within the specified time period. It is believed that Dow has limited room for an exit.
The agreement provided Dow an option to pay $750 million break-up fee, and could have left the deal if it were not approved by the U.S. and European antitrust authorities.
Philadelphia, Pennsylvania-based Rohm & Haas stated that both parties must agree to an extension of the deadline. Rohm & Haas said that it intends to pursue all available alternatives to protect its shareholders' interests.
Dow Chemical Co. is currently trading at $14.37, up $0.04 or 0.28% on the NYSE.
Rohm & Haas is currently trading at $55.90, down $9.92 or 15.07% on the NYSE.
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December 19, 2025 15:10 ET U.S. inflation data and interest rate decisions by major central banks were the highlights of this busy week for economics news flow. Employment data and survey results on the housing markets also gained attention in the U.S. In Europe, the European Central Bank and Bank of England announced their policy decisions and macroeconomic projections.