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Dow Chem, Rohm & Haas, to Merge
$15.3 billion mega-deal will integrate two of chemical, advanced materials industries biggest players.
July 10, 2008
Dow Chemical struck a deal to merge with Rohm and Haas where the acquirer will pay $15.3 billion, or $78 per share, in an all-cash transaction.
The merger represents a whopping 74% premium on Rohm and Haas shares. Equity investments from Berkshire Hathaway, for $3 billion, and from the Kuwait Investment Authority, for $1 billion, were used by Dow Chemical in executing the deal.
A UBS report rated Dow Chemical a ‘buy,’ unchanged from its status prior to the deal’s announcement; the analysts predicted that the company will not be executing any further M&A in the near term. A Buckingham Research Group analysis called for EPS dilution from Dow next year and said Rohm and Haas has struggled with increasing materials costs; perhaps the synergies to be realized between the companies will help relax this tension.
The Buckingham report suggested additional debt financing would be needed for the deal.
“The combined company will offer customers innovative and differentiated solutions in what has become a technologically demanding and increasingly competitive global marketplace for specialty chemicals and advanced materials,” said Rohm and Haas chief executive Raj Gupta.
Rohm and Haas recorded revenues of $8.9 billion in 2007 and Ebitda of $1.5 billion.
Predictably, Rohm and Haas’ stock leapt by almost $30 per share, or 65% in Thursday trades. It should be noted that while Dow Chemical spent at a 74% premium, the $44.83 per share at which Rohm and Haas traded prior to the deal’s announcement was barely above its 52-week low.
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