Dow, Rohm and Haas stocks drop on failed PIC deal

29 December 2008 16:20  [Source: ICIS news]

A Dow chemical plant in Midland MichiganHOUSTON (ICIS news)--Share prices of both Dow Chemical and Rohm and Haas slipped by more than 19% on Monday after Dow's joint deal with Kuwait’s Petrochemicals Industries Company (PIC) went sour and speculation grew about the future of Dow and Rohm and Haas's merger.

As of about 10:00 New York time (15:00 GMT) Dow's stock dropped to $15.24 (€10.82), a 19.56% loss on a $18.92 close 26 December on the New York Stock Exchange (NYSE). Shares of Rohm and Haas fell to $49.16 (€34.90), down 22.66% on its $63.56 close 26 December.

Dow has been in negotiations with Rohm and Haas for an $18.8bn acquisition of the specialty chemicals company.

The Rohm and Haas deal was supposed to be paid for in part with PIC's $17.4bn (€12.53) investment in Dow, creating an equal partnership to be called K-Dow Petrochemicals, but the deal went sour over the weekend.

Dow's "lack of cash" could affect the price of the Rohm and Haas takeover, an analyst said, even after assurance from Rohm and Haas that the deal is moving forward and that the PIC close is not a condition of its agreement with Dow.

"Dow should be looking to protect its shareholders by cutting the Rohm and Haas deal at a lower price or walking away from the deal by paying a break up fee," said PJ Juvekar of Citi Investment Research.

"If Dow is forced to pay the original price of $78/share, then we will have to re-evaluate our thesis on Dow."

Juvekar said the consequences of Dow's broken deal with PIC will reverberate through the larger petrochemical market.

($1 = €0.71)

For more on Dow Chemical and Rohm and Haas visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Ryan Hickman
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