Dow Chemical Co agreed on Monday to go through with its purchase of Rohm and Haas Co reaching a settlement after the two sides were scheduled to go to a trial over Dow's refusal to close the deal.

The companies said Rohm & Haas shareholders will receive just less than $79 a share -- $78 per share, plus a ticking fee agreed upon in the original deal.

But Rohm's two largest shareholders -- the Haas Family Trusts and Paulson & Co -- will take up to $3 billion owed them from the deal in the form of preferred equity securities in Dow.

All the other shareholders will be paid completely in cash.

Dow shares fell about 11 percent to close at $6.33, while Rohm shares closed up 16 percent at $74, both on the New York Stock Exchange.

Wednesday night until now has been nonstop work by a lot of people and I feel very happy to land where we did, Rohm CEO Raj Gupta said outside the Georgetown, Delaware courtroom.

Rohm sued Dow in January after Dow refused to proceed with the takeover, claiming the deal under its original terms would jeopardize its future.

The two companies had been scheduled to face off in Delaware Chancery Court Monday morning and the courtroom filled beyond capacity with a multitude of lawyers, investors and top Rohm and Haas executives.

The companies eventually asked for a delay so they could keep talking in search of the settlement.

PREFERRED INVESTMENT

Last July, Dow agreed to buy Rohm and Haas for $78 a share to broaden its product offerings in higher-margin markets such as paints, coatings and electronic materials. Because Rohm was highly sought after, Dow agreed to pay what was then a premium of more then 70 percent for the company.

But Dow balked at closing after its $17.4 billion plastics joint venture with Kuwait fell apart. Dow had intended to use proceeds from the venture to help fund the Rohm deal.

Under the terms of the deal, the Haas Family Trusts and Paulson & Co will take $2.5 billion of the money owed them in the form of preferred equity. Dow will also have the option to pay out an additional $500 million as preferred equity to the Haas trusts.

Dow has been working to avoid a credit downgrade that could trigger loan defaults and limit the company's access to commercial paper.

The company already has cut jobs, slashed its dividend 64 percent and said it is looking at the possible sale of various assets.

Dow CEO Andrew Liveris said in an interview his company has been interacting very closely with the credit rating agencies over the last 40 days and added he would be very disappointed, if the rating agencies were to cut Dow's rating, despite the new deal structure.

He argued the settlement reestablished the foundation of the company.

In late December we had a very big blow delivered to us and left us with a hole of about $7 billion. In one fell swoop we have put $3 billion back, plus the dividend cut that adds another $1 billion, said Andrew Liveris, in an interview with Reuters.

A couple of minor sales in the next 60 days and we are all the way back, he said.

Still, a combination of Dow's deal troubles and the overall

weak economy have left the company's share smarting.

Before the deal was announced in July, Dow's shares were trading near $34 and the company's market capitalization was over $31 billion.

According to Reuters Data, Dow's market capitalization is now less than $6 billion -- considerably less than the more than $15 billion it will pay for Rohm and Haas.

(Additional reporting by Paritosh Bansal in New York, editing by Jeffrey Benkoe and Andre Grenon)

Manufacturing