Dow Chemical's greatest acquisition--ever!

An update to the post regarding a near 50% increase in chemicals by the chemical industry...Dow Chemical will acquire Rohm & Haas to the tune of $15, 300, 000.00.

Chemical industry raises prices

"Dow Chemical Buying a Rival for $15.3 Billion"

by

Abha Bhattarai

July 11th, 2008

The New York Times

Dow Chemical said Thursday that it had agreed to buy Rohm & Haas, a specialty chemical maker, for about $15.3 billion in cash.

The deal, the biggest in Dow's 101-year history, is being financed with equity investments of $3 billion by Berkshire Hathaway, Warren E. Buffett's huge holding company, and $1 billion by the Kuwait Investment Authority.

The deal, expected to close by early 2009, will create one of the nation's largest specialty chemical companies at a time when the industry is floundering and commodity prices are at record highs.

Dow said it would pay $78 for each share of Rohm & Haas, a 74 percent premium on the company's closing price of $44.83 a share on Wednesday.

Dow, which is based in Midland, Mich., will absorb $3.5 billion of Rohm & Haas debt.

"There are many jewels out there, and this is one of them," Andrew N. Liveris, chairman and chief executive of Dow, said in a conference call. "The bottom line is, this is a powerful new Dow."

But analysts said they were worried that Dow may have unrealistic growth expectations.

"It's going to be a challenging environment for Dow," said Frank Mitsch, an analyst at BB&T Capital Markets, which downgraded its rating of Dow shares to hold from buy on Thursday. "It's a heck of a premium, especially at a time when industry fundamentals are suffering."

Rohm & Haas will continue to do business under its own name and will maintain its headquarters in Philadelphia. Last year, Rohm & Haas reported revenue of $8.9 billion.

Its products include electronics technologies, coatings, and packaging and building materials.

"I have relentlessly talked to our employees, customers and stockholders about the imperative to seek opportunities for transformative change," said Raj L. Gupta, the chairman and chief executive of Rohm & Haas. "In its 100-year history, Rohm & Haas has constantly reinvented itself, and this agreement offers outstanding potential to do the same yet again."

The deal, unanimously approved by the boards of both companies, must be approved by Rohm & Haas shareholders.

Shares of Rohm & Haas rose 65 percent in midday trading, to $73.99, while shares of Dow were down as much as 6.5 percent.