Dow Chemical and Rohm and Haas reach an odd settlement

Over the last year-and-a-half, as the economy has worsened, the M&A business has become a game of "on again, off again." One of the most recent examples of a company that wanted make a huge purchase and then got cold feet is Dow Chemical (DOW), which announced it would buy specialty chemical firm Rohm and Haas (ROH) for $78 a share. But that was over six months ago.

In the meantime, the global demand for chemicals has collapsed. Dow has dropped to a 52-week low and has cut its dividend to save cash. In the meantime, Rohm has taken Dow to court to force the transaction to close. Most news reporting about the transaction has indicated that the offer Dow made had almost no outs in it. And so, on the court house steps, Dow decided it was out of options for dumping Rohm and opted not to be humiliated in front of a judge.

The new deal has some odd wrinkles. Some of the money is being put up by one of the large holders of Rohm and Haas, in effect making a large bet that the marriage will work. According to Dow Chemical, "The settlement agreement involves a new substantial equity investment in Dow of $2.5 billion and at Dow's option an additional $500 million of equity, at the closing of the merger by the two largest shareholders of Rohm and Haas, one of which is the Haas Family Trusts."

For all of the other shareholders in the companies, other terms appear to be the same. It is almost as if there had never been a fight over the deal at all.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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