30 December 2008 18:36 [Source: ICIS news]
TORONTO (ICIS news)--Dow Chemical may be able to walk away from its takeover of Rohm and Haas “net cash positive” after Kuwait cancelled the K-Dow joint venture, analysts at HSBC said in a research note on Tuesday.
“Dow could potentially take the proceeds of the Kuwaiti break-up fee, pay Rohm to break the deal, and still walk away with more than $1.2bn (€852m) in cash,” the London-based international bank said.
According to HSBC, Dow could get a break-up fee of about $2bn from ?xml:namespace>
“While the deal cancellation with Kuwait and, in turn, a potential deal cancellation with Rohm and Haas, would be a major setback to [Dow CEO Andrew] Liveris’ portfolio transformation plan, on the margin, it may be positive for Dow stock, while a negative for Rohm stock, as Dow would still walk away with a clean balance sheet,” said HSBC.
Dow investors would likely welcome either a complete cancellation of the Rohm deal, leaving Dow with a net cash positive position, or, alternatively, a renegotiation of the Rohm deal at a lower price so that it would become accretive from year one, the bank added.
However, industry observers said Dow may not seek to get a break-up fee from Kuwait – which could be as high as $2.5bn, according to some reports - as it was keen to maintain good business relations in the oil and gas rich
Also, Dow would have to prove in court that
In a comparable case, US petrochemicals producer Huntsman this month pocketed $1bn from private equity firm Apollo after Apollo pulled out of a deal to take over Huntsman and merge it with Hexion Specialty Chemicals.
HSBC, for its part, remains “overweight” on Dow Chemical with a share price target of $30.00, based on an attractive valuation and a dividend yield of over 8% which Dow was not likely to cut, it said.
Dow's stock was up 0.78% to $15.44 on Tuesday in
Meanwhile, Rohm and Haas' shares were up 9.86% to $58.6 on speculation that Dow would be forced to go through with the takeover deal.
($1 = €0.71)
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