Rohm and Haas buy will lift growth, EPS - Dow

10 July 2008 15:58  [Source: ICIS news]

Liveris sees acquisition as pivotal pointLONDON (ICIS news)--Rohm and Haas will become the foundation for the acceleration of Dow’s performance products and advanced materials business, Dow CEO Andrew Liveris said on Thursday.

The $18.8bn acquisition of the leading US specialty chemicals and advanced materials producer will give Dow the opportunity to grow faster, Liveris said.

The combined groups could achieve topline industry growth of 5-7% compared with projected achievable growth for Dow of 4%.

The Rohm and Haas advanced materials portfolio, including the business that Dow is contributing to the new operating segment, is expected to benefit from considerable raw material, product and technology synergies.

Liveris called the Rohm and Haas acquisition the “pivotal point” in the transformation of Dow into a high-growth, diversified chemicals and materials company.

The deal opens new channels to market for existing produces and technologies and strengthens Dow’s presence in rapidly developing economies, he said.

Dow expects $2bn-$2.6bn in additional value creation from the acquisition. It will be spending $1.7bn on research and development annually.

The key opportunities for growth lie in electronic materials, coatings, specialty chemicals and specialty packaging, it said.

The acquisition, at 11.5 times estimated 2008 EBITDA (earnings before interest, tax, depreciation and amortisation), according to Dow, meets all the chemical giant’s acquisition criteria, Liveris said, and would be “meaningfully accretive to earnings” in the second year following competition.

Liveris said the new Dow would target an earnings per share (EPS) of $4.00 in the next industry trough expected in 2010/2011 compared with an earlier $3.50 target. Dow’s EPS in 2007 was $2.99 from $3.82 in 2006.

At the next industry peak the more specialty-oriented Dow could be earning more than $10/share, he added.

Dow shares were trading 2.83% down from the previous close at $33 in early New York trading, while Rohm and Hass stock was trading at $73.95, up 65% from the previous close. 

($1 = €0.64)

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By: Nigel Davis
+44 20 8652 3214



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