Dow Chemical to buy Rohm and Haas

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Friday, July 11, 2008

Rohm and Haas Corporate Headquarters in 2007.

United States chemical giant Dow Chemical has announced that it is to buy Philadelphia-based rival Rohm and Haas.

Dow is paying US$78 per share, a 74 percent premium, which makes the agreement worth around $15.3 billion, or $18.8 billion after adjustments are made for assumed debt. The deal has been agreed unanimously by the boards of both companies, and will be partially funded by Warren Buffett's Berkshire Hathaway and the Kuwait Investment Authority.

In the short term, Dow's share price may suffer as analysts downgrade the company's stock rating. However, the purchase of Rohm and Haas will help to expand Dow's presence in the specialty chemical market, which helps to provide more revenue stability through the entire business cycle. Dow expects to see "significant revenue synergies", leaving it in "an excellent position in a number of industry segments that are poised for significant growth given long-term market megatrends, most notably in the electronic materials and coatings segments."

Dow plans to set up an advanced materials business unit at the Rohm and Haas headquarters in Philadelphia, and this unit will retain the Rohm and Haas name. Two Rohm and Haas directors will join Dow's board, which will expand to 14.