Acrylates pose regulatory hurdle for US Dow deal

10 July 2008 23:12  [Source: ICIS news]

HOUSTON (ICIS news)--Market concentration within acrylic acid may well become a regulatory hurdle in Dow Chemical's $18.8bn (€12bn) bid for Rohm and Haas, analysts said on Thursday.

In the North America, Dow and Rohm and Haas hold a 60% share of the market, said John McNulty, an analyst with Credit Suisse.

Bank of America estimates that the two companies control at least 35% of the global acrylates market. It expected that regulators will scrutinise the deal as a result.

McNulty said divesture is feasible, although Dow will likely try hard to keep as much capacity as possible.

"Acrylates is presumably a key source of potential raw-material purchasing synergies," he said.

Dow's plan to buy Rohm and Haas makes market sense, acrylates buyers said, but there were differing opinions as to how large a regulatory stumbling block the combined acrylates businesses could present.

"Regulators may say Dow has to spin off some of the new acrylates business," said a buyer in the coatings and adhesives market.

Another buyer said a potential monopoly is a non-issue.

"Dow has the ability to demonstrate that the acrylate, methacrylate and polymer businesses are global markets," he said. Other companies are similarly organised with competitive capacities.

He also said that Dow, which recently announced it would trim acrylic acid production by 30%, will end up debottlenecking that capacity after the acquisition.

As for customer pricing and product availability, he anticipated no difficulties unless Dow chooses to shutter some plants, even temporarily.

Customers currently sourcing only the two companies for acrylates, though, would have to develop relationships with other major or fringe acrylates suppliers.

If the deal closes, it would create the world's largest specialty chemical company, according to Moody's Investors Service.

(Additional reporting by Larry Terry)

($1 = €0.64)

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