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Analysts speculate on Dow Chemical/Rohm & Haas deal

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With the recent collapse of a major joint venture between Dow Chemical, Midland, Mich., and a state-owned Kuwaiti company, analysts wonder if Dow Chemical will reconsider the $15.3 billion it had planned to pay for Rohm & Haas, Philadelphia, according to USA Today.

During July's energy crises, Dow Chemical had agreed to pay a 74 percent premium for Rohm & Haas. However, on Sunday, Kuwait's government cancelled its planned $17.4 billion venture with Dow Chemical because the government thought the deal was too risky in the face of economic crisis and because crude oil prices have fallen more than 70 percent since the agreement was announced. Dow Chemical had expected to receive as much as $9 billion in pretax proceeds from the deal.

Although Dow Chemical officials would not comment, Rohm & Haas says the acquisition has not been affected by the failure of the joint venture.

The acquisition would help Dow Chemical eliminate Rohm & Haas as its longtime opponent in the competitive chemical sector, and it also could better compete with Germany's BASF, the world's largest chemical company.

However, analysts say it is realistic to expect Dow Chemical to seek a price lower than the previously agreed upon $78 a share. Since the acquisition agreement, the economy has stumbled and Dow Chemical has said it will cut 5,000 jobs—11 percent of its work force. It has closed 20 plants and idled 180 plants.


1/5/2009

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