UpdateForced merger would only help Rohm shareholders - Dow

03 February 2009 18:22  [Source: ICIS news]

[Adds response from Rohm and Haas in paragraphs 9 to 14, updates share price data]

TORONTO (ICIS news)--Forcing through Dow Chemical's merger with Rohm and Haas would benefit only one party - the current shareholders of Rohm and Haas -  but it could hurt the companies' employees, Dow said in a court filing on Tuesday.

Dow, which responded to Rohm and Haas' lawsuit from last week, reiterated that under current financial market conditions and the prevailing uncertainty, the merger would threaten the viability of the new entity and was contrary to the interests of the 55,000 Rohm and Haas and Dow employees, the associated communities, suppliers and customers.

“For those employees in Philadelphia, Pennsylvania, Midland, Michigan and the hundreds of other communities in which Dow, Rohm and Haas and their many customers and suppliers do business, the viability of the merged entities and their prospects for creating value are vital,” Dow said.

“The interests of all who make up Dow and Rohm and Haas, and not just the narrow interests of some, must be balanced carefully before the drastic remedy of specific performance is ordered,” it said.

In a point-by-point response reviewing the history of the merger deal, Dow said that until late December - and even in the ongoing financial market turmoil - it stood by its deal to acquire Rohm and Haas for $18.5bn (€14.4bn), including debt, for $78/share.

However, Kuwait’s unexpected withdrawal from the K-Dow petrochemicals joint venture, and the sudden unavailability of about $9bn in cash would force Dow, if it were to complete the Rohm deal, to draw down a comparable amount on a short term bridge loan under conditions that would quickly place it in default, it said.

"Over a period of mere days and weeks, a confluence of dramatic and unforeseeable shocks - to Dow, to the chemical industry as a whole, and to financial markets - upset all reasonable expectations and cast a dark shadow of uncertainty over the viability of the Rohm and Haas acquisition," Dow said.

However, Rohm and Haas insisted on Tuesday that Dow close the transaction.

"The difficult conditions in the chemical industry and financial markets commenced before Dow agreed to acquire Rohm and Haas and were widely expected to worsen at the time we entered into the transaction,” Rohm said in a prepared press statement.

Dow, rather than Rohm and Haas shareholders, had assumed those risks and should now honour its obligations and close the transaction, it said.

Rohm and Haas also made available a letter to Dow’s board of directors from Monday in which it urged Dow’s board to “take control of the situation”.

Dow, not Rohm and Haas, took the economic risks, and in particular the risk that the K-Dow deal might not close, it wrote.

“If Dow is in the terrible financial condition that your chairman suggests, we do not know how you could have paid the 30 January 2009 cash dividend of almost $400m,” Rohm said in the letter.

The letter outlined a number of actions Dow could take to close the merger, including the suspension of dividend payments, asset sales, and equity issues in private and public markets.

Dow’s court filing and Rohm and Haas’ letter to Dow’s board are on the companies’ respective websites.

Earlier on Tuesday, Dow reported a net loss of $1.55bn for the fourth quarter of 2008 on Tuesday as demand dropped away sharply and the company took restructuring and other charges, and it warned of more plant closure and job cuts in a weak 2009.

Dow Chemical’s shares were priced $11.08, up 0.27%, in Tuesday afternoon trading after jumping 5.8% in early morning trading. Rohm and Haas’ shares were up 3.4% to $53.78.

($1 = €0.78)

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

By: Stefan Baumgarten
+1 713 525 2653

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