Dow Chemical Co and Rohm and Haas Co said they are back at the bargaining table to try to settle litigation related to their proposed merger, sending both companies' stock up more than 15 percent.

Dow also said it had agreed with its lenders to an option that could extend its loan for the deal by a year, but it has reduced the size of the loan by $500 million to $12.5 billion.

The companies said in a joint statement that they could not predict the outcome of the talks and would not comment further. The dispute is scheduled to go to trial on Monday.

Rohm and Haas sued Dow in January to try to force the company to close the merger.

Dow agreed to buy Rohm and Haas last July for $78 a share, which represented a 74 percent premium, to broaden its product offerings in higher-margin markets such as paints, coatings and electronic materials.

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

When it signed the agreement, Dow arranged for a one year, $13 billion loan from a consortium of banks. But Dow has argued that the loan was never intended to be the primary source of funding for the deal.

Dow said in a filing with the U.S. Securities and Exchange Commission on Friday that its lenders had cut the loan by $500 million and agreed to give Dow the option to extend the loan for another year, provided the company met certain conditions.

Those conditions include payment of an extension fee, reduction of the principal of the loan to less than $8 billion and compliance with a total leverage ratio.

Shares of both companies surged after the announcement. Dow Chemical was up $1, or 15.5 percent, at $7.47, and Rohm rose $8.49, or 15.7 percent, to $62.50 on the New York Stock Exchange.

(Reporting by Michael Erman; Editing by Lisa Von Ahn)

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