Dow Chemical Co. today agreed to buy Rohm and Haas Co. for US$15.3 billion. Dow reportedly is broadening its product offerings in higher margin markets such as paints, coatings and electronic materials.
The all-cash deal for US$78 per share is a 74% premium compared to Rohm and Haas Co's closing price of US$44.83 per share on Wednesday on the New York Stock Exchange. The deal would be valued at US$18.8 billion; however, Rohm & Haas has a debt of US$3.5 billion.
Financing for the acquisition includes an equity investment by billionaire Warren Buffett's Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred securities for US$3 billion and US$1 billion, respectively.
With this acquisition, Dow boosts its presence across a wide range of specialty markets and positions itself to withstand industry downturns. Dow has also secured US$13 billion debt financing from Citigroup, Merrill Lynch and Morgan Stanley. It hopes to pay down some of this debt immediately after receiving the proceeds from its planned joint venture with Kuwait Petroleum Corp.
In December 2007, Dow announced it would receive US$9.5 billion from Kuwait Petroleum Corp to form a 50-50 plastics joint venture. Dow will create an advanced materials business unit at Rohm and Haas' current headquarters in Philadelphia that will have a total annual revenue of nearly US$13 billion, upon completion. Two Rohm and Haas directors will join the Dow's board, bringing the total to 14. For more information, visit www.dow.com.