UpdateDelays may hit Dow/Rohm and Haas deal - analyst

23 January 2009 21:43  [Source: ICIS news]

Dow CEO Andrew Liveris(adds new lead, paragraphs 2-6, updated stock prices)

HOUSTON (ICIS news)--Dow Chemical's $18.8bn (€14.5bn) merger with Rohm and Haas may take longer to close than the two business days stipulated by the companies' agreement, an analyst with Credit Suisse said on Friday.

The US Federal Trade Commission (FTC) has given the deal anti-monopoly clearance, which started the two-day countdown for the merger to close.

Dow's initial $78/share offer will probably remain unchanged, according to a research note by John McNulty, Credit Suisse analyst. In fact, the firm said there is only a 20% chance that the deal would close at a slightly lower price.

The chances of the merger falling through are less than 5%, McNulty said.

However, Rohm and Haas may give Dow Chemical more time to arrange financing for the deal, McNulty said.

In a joint statement, Dow and Rohm and Haas said the companies are discussing the closing of the transaction following clearance from the FTC.

The approval comes as Dow and the FTC reached an agreement about FTC concerns that the merged company would be anticompetitive and violate federal law, the regulator said in a statement.

As such, Dow agreed to sell several of its businesses to a buyer that the FTC will approve. Those businesses include Dow's acrylic monomer, hollow-sphere particle and acrylic latex polymer operations.

Assets to be sold include the following:

  • An acrylic monomer plant in Clear Lake, Texas.
  • Acrylic polymer operations in St Charles, Louisiana.
  • An acrylic polymer plant in Alsip, Illinois.
  • An acrylic polymer plant in Torrance, California.
  • An acrylic monomer research-and-development group in South Charleston, West Virginia.
  • An acrylic latex polymer research-and-development group in Cary, North Carolina.

The FTC had voiced concerns that the Dow deal would reduce competition in the North American markets for acrylic acid (AA), butyl acrylate (butyl-A), ethyl acrylate (ethyl-A) and other acrylics, the commission said.
The merger could also reduce competition in the markets for hollow-sphere particles and acrylic latex polymers used in traffic paint, the FTC said.

Without the divestments, the company's market share for acrylic acid would exceed 40%, the FTC said. Butyl acrylate would be nearly 75% and ethyl acrylate would be almost 90%.

The combined would have a monopoly in hollow sphere particles and acrylic latex polymer for traffic paint, the FTC said.

Already, Dow has hired JP Morgan to advise it on the possible sale of its acrylic acid and esters operations - as well as its North American UCAR emulsion systems specialty latex business.

Dow's Rohm and Haas deal has already received approval from the European Commission.

Although Dow has received regulatory approval for the deal, the merger is still facing strain after another Dow deal fell through.

Under that separate deal, Dow would have established the K-Dow Petrochemicals joint venture with Petrochemical Industries Co (PIC) of Kuwait. Had the joint venture closed, Dow would have received $7.5bn in cash from PIC and a $1.5bn cash distribution from K-Dow.

Dow's offer for Rohm and Haas comes to $78/share.

Dow had a 10 January deadline to close the deal, according to the merger agreement. For each day after the deadline, Dow will pay Rohm and Haas about $3.35m in late fees, according to the agreement.

So far, Dow's late fees have exceeded $40.2m.

As of 15:47 hours New York time (20:47 GMT), Rohm and Haas shares were trading at $66.29, up 9.64%. Dow shares were trading at $14.35, down 0.22%

($1 = €0.77)

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

By: Al Greenwood
+1 713 525 2645

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