Rohm and Haas sues Dow on merger delay

26 January 2009 18:03  [Source: ICIS news]

Rohm and Haas sues DowHOUSTON (ICIS news)--US specialty chemicals producer Rohm and Haas sued Dow Chemical on Monday, accusing the company of breaching an agreement to close on a $18.8bn (€14.5bn) merger.

Rohm and Haas asked the Delaware Chancery Court court to order Dow to immediately close the deal.

Rohm and Haas did not specify damages, saying an order for Dow to close the deal would eliminate any need to calculate such amounts. While such damages would be enormous, they would still be imprecise, Rohm and Haas said. 

Under the merger agreement, Dow was supposed to close the deal by Tuesday, two business days after it received final regulatory approval.

Despite the regulatory approval, Dow CEO Andrew Liveris told Rohm and Haas CEO Raj Gupta that his company had no intentions of closing the merger by Tuesday.

Dow said it would issue an update by 30 June on whether it would proceed with the deal, Rohm and Haas said in the lawsuit.

Dow's refusal to close the merger was driven by the Kuwait government's decision to abandon a proposed joint venture between Dow and Petrochemical Industries Co (PIC), according to the lawsuit.

Had that joint venture closed, Dow would have received $7.5bn from PIC and a $1.5bn cash distribution from the resulting joint venture, K-Dow Petrochemicals.

However, the failure of the joint venture does not give Dow any basis to abandon its merger with Rohm and Haas, according to the lawsuit. Likewise, Dow could not abandon the deal due to trouble securing financing, according to the lawsuit.

Dow cited both troubled credit markets and the failed joint venture as the reasons behind missing the deadline.

Closing the merger was not contingent on Dow finding the financing for the deal, according to the lawsuit. Moreover, the merger agreement prohibited Dow from using troubled credit markets as the basis of abandoning the deal.

The agreement went beyond credit markets, however, prohibiting Dow from citing developments "generally affecting the economy or the financial, debt, credit or securities markets, in the US or elsewhere", the lawsuit said.

Such restrictive terms were intentional, Rohm and Haas said in the lawsuit.

During negotiations, Rohm and Haas was considering another bid from an unnamed rival, according to the lawsuit. Rohm and Haas said it accepted Dow's offer because Dow agreed to such restrictive terms, demonstrating its commitment to close the deal.

Moreover, Dow acknowledged that the general economy and the world's credit markets would continue to deteriorate before the deal was closed, Rohm and Haas said.

In addition, both sides agreed that failing to close the merger would "constitute irreparable harm without any adequate remedy at law", Rohm and Haas said said.

Once the K-Dow joint venture fell through, Dow began scrambling for other ways to delay the deal, Rohm and Haas said in the lawsuit.

Rohm and Haas accused Dow of lobbying US regulators in an attempt to delay approval of the deal.

Later, Liveris asked Rohm and Haas' CEO, Gupta, if the merger could be delayed until 30 June, according to the lawsuit.

Such a move would give Dow more time to restructure its business and balance sheet, Rohm and Haas said, but Gupta refused to delay the deal.

($1 = €0.77)

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By: Al Greenwood
+1 713 525 2645

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