Dow Chemical deal with Rohm & Haas near close?

Dow Chemical (DOW) backed away from its deal to buy specialty chemical company Rohm & Haas (ROH). Papers filed in a suit by Rohm to try to get Dow to close the deal indicate that Dow does not have much of a leg to stand on if it wants to walk away.

Most analysts suspect that when Dow lost the deal with Kuwait and the $7 billion that went with it, the biggest US chemical company lost most of the money it needed to complete the Rohm deal. The recession has also crippled the chemical business, making the merger less attractive.

But Dow's lawyers have almost certainly indicated to the company that Rohm has the better argument and that Dow could be forced to close the deal or pay tremendous damages.

News from settlement talks is that a deal may be getting close. According to Reuters,"Dow Chemical Co. said on Sunday that settlement talks with Rohm & Haas Co were going 'quite well' on the eve of a scheduled court hearing on their soured $15 billion merger."

Based on its weak legal position, Dow needs the deal to be settled out of court. The firm's stock trades at about $7, near its 52-week low and down from a period high of over $43. Rohm, on the other hand, trades at almost $64, well above its 52-week low.

The market is betting that if Dow cannot close a transaction, a judge will make it pay a high price.

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

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