DOW Reels In Rohm & Haas Deal

The Dow Chemical Co. (DOW - Analyst Report) announced that it completed the acquisition of Rohm and Haas.

Synergies are targeted to be $1.3 billion. Dow has decided to exercise its option to have the Haas Family Trusts make an additional $500 million investment in Dow equity. This is consistent with Dow's disciplined plan to retire the bridge loan for the financing of the Rohm and Haas transaction by the end of 2009.

This will be accomplished through the sale of assets, issuance of equity and debt, and the previously announced reduction in the Company's dividend to preserve cash.

Dow is required to divest the following businesses: Clear Lake, Texas, acrylic acid and esters plant and the related glacial acrylic acid, butyl acrylate and ethyl acrylate businesses in North, Central, and South America, UCAR Emulsion Systems specialty latex businesses in North America and North American hollow plastic pigment business.

The company also has entered into a definitive agreement to sell the stock of Morton International, Inc., the salt business of Rohm and Haas, to K+S Aktiengesellschaft for $1.675 billion.

Dow has also re-negotiated and extended the terms of the Rohm and Haas bridge loan, reduced the dividend by 64%, saving approximately $1.0 billion on an annualized basis and negotiated for more favorable terms in connection with the Rohm and Haas transaction, including $2.5 billion in preferred stock and exercising an option for $500 million in common equity from the Haas Family Trusts.

These actions, once completed, and taken together with Dow's offer to issue $550 million in equity to the Rohm and Haas ESOP, will effectively reduce Dow's originally anticipated bridge loan debt from $13.0 billion to approximately $7.5 billion. The Company has almost replaced the $7.5 billion cash shortfall created by the failure of the K-Dow transaction to close.