Dow Chemicals attempts to keep $15 billion bid for Rohm & Haas alive: report

31 December 2008

With the Kuwaiti government having pulled out of a $17.4-billion petrochemical joint venture with Dow Chemicals, the US company is reported to be straining to keep its $15-billion takeover of rival Rohm & Haas from collapsing.

The project was to have been executed through a 50:50 joint venture company, K-Dow Petrochemicals, for which Kuwait had already granted its approval. (See: Kuwait scraps $17-billion Dow deal)

Dow Chemicals had agreed in July to acquire Rohm & Haas for $78 per share, in a move aimed at broadening its specialty product offerings. In case Dow backs out of the deal, it would have to shell out $750 million as a termination fee to Rohm & Haas.

The Kuwaiti decision has choked off around $9 billion in financing that Dow Chemicals had planned to use to part finance the Rohm deal. Accoding to the UK-based Financial Times cited unidentified sources as saying that Dow Chemicals still had an option of tapping into a $13-billion bridge loan for the takeover.

The newspaper also said that the company might try and renegotiate the price of the deal to factor in the recent drop in Rohm's share price, while saying that both Dow and Rohm refused to comment.

Stock prices of both Dow Chemical and Rohm & Haas have plummeted over 16 per cent at the start of the week as a result of Kuwait's decision. Rohm's share price came down to around $53.34. Reports quoted analysts as saying that Dow could find the going tough even it it decides to proceed with the acquisition, as it would have to take on a huge load of debt. Consequently, they say the pressure is on Dow to renegotiate the price of the deal or walk away.