Wednesday, Dow Chemical Co. (DOW) said it completed the acquisition of Rohm and Haas (ROH), creating a $14.0 billion diversified business portfolio - Dow's Advanced Materials division. Dow indicated the combined company would have one of the largest research and development programs in the chemical industry.
The company is expecting the new combined business to achieve $3.0 billion in additional value growth opportunities, as well as into annual cost synergies of $1.3 billion.
Dow considers Rohm and Haas a key element in its new Advanced Materials division, which includes Coatings, Building and Construction, Specialty Materials, Adhesives and Functional Polymers, and Electronic Materials.
Dow Chemical named Pierre Brondeau to head the new entity as president and CEO of the division.
Andrew Liveris, Dow Chairman and CEO said, The closing of this transaction strongly positions Dow for the future by transforming our business portfolio.
In July 2008, Dow Chemical agreed to buyout Rohm and Haas for $15.4 billion or $78 a share at a 74% premium with the hope of broadening its product offerings. The ongoing financial turmoil raised queries about the true value of the deal. On January 26, 2009, Philadelphia, Pennsylvania-based Rohm & Haas said its acquisition by The Dow Chemical Company would not be completed on or before January 27, 2009, a prime condition in the merger agreement, as intimated by the latter.
Dow had hoped to finance the deal with a $13 billion bridge loan, a $3 billion equity investment by Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority. Matters, however, took a turn for the worse with Kuwait pulling out of the $17.4 billion joint venture with Dow's plastic division in December. Rohm and Haas had then filed a complaint with the Court of Chancery of the State of Delaware to enforce the merger agreement with Dow entered on July 10, 2008.
Dow expects the new Advanced Materials division to deliver significant cost and revenue synergies, increasing its annual cost synergy estimates to $1.3 billion, capitalizing on additional expected cost savings in the areas of combined purchasing and centralized business services. The Advanced Materials division is strongly positioned in more resilient markets, as well as businesses that are poised for growth in the economic upturn, including coatings, adhesives and electronics.
Also, in line with plans to retire the bridge loan for the financing of the Rohm and Haas transaction by the end of 2009, Dow has decided to exercise its option to have the Haas Family Trusts to make an additional $500 million investment in Dow equity.
On January 23, 2009, Dow entered into a consent order with the U.S. Federal Trade Commission (FTC) that permitted the completion of the acquisition, provided that certain actions to address potential anticompetitive effects are implemented within 240 days of the deal closing. Under the agreement, Dow is required to divest its 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.
Dow said it has already initiated procedures to comply with the FTC consent order and has been actively seeking buyers for the impacted businesses. The acquisition previously received regulatory clearance from the European Commission on January 8, 2009. Effective today, Rohm and Haas common stock will cease trading.
DOW closed Wednesday's regular trading at $8.81, gaining $0.38 or 4.51%, on a volume of 20.16 million shares. In after market trading the stocks are are currently at $8.88, up $0.07 or 0.91% on the NYSE.
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