Dow Chemical buys Rohm and Haas

NEW YORK Wed Apr 1, 2009 7:25pm EDT

Dow Chemical Company Chief Executive Officer Andrew Liveris delivers a speech at the Global Management Forum in Tokyo October 27, 2008. REUTERS/Yuriko Nakao

Dow Chemical Company Chief Executive Officer Andrew Liveris delivers a speech at the Global Management Forum in Tokyo October 27, 2008.

Credit: Reuters/Yuriko Nakao

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NEW YORK (Reuters) - Dow Chemical (DOW.N) completed its more than $15 billion acquisition of Rohm and Haas ROH.N on Wednesday, saying it will divest several assets to comply with a U.S. government order.

Rohm and Haas is the key element in Dow's new Advanced Materials division, which will be headed by Pierre Brondeau as president and chief executive, Dow said.

The division, which includes coatings, building and construction, specialty materials, adhesives and functional polymers, and electronic materials, is intended to achieve $3 billion in additional value growth opportunities, as well as annual cost synergies of $1.3 billion.

The Wall Street Journal, citing a person close to the matter, later reported that Dow was close to an agreement to sell the Morton Salt unit of Rohm & Haas to Germany's K&S AG for $1.68 billion.

Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on Dow Chemical to the lowest investment grade, BBB-minus, from BBB and left the company under review for further downgrade.

"We believe the (Rohm and Haas) transaction is an important strategic initiative for Dow... but it will meaningfully stretch the financial profile to a level beyond what we consider consistent with the former ratings," said S&P's credit analyst Kyle Loughlin.

In a statement about the acquisition, Dow said it has moved to comply with a Federal Trade Commission order to divest several assets and has been actively seeking buyers for the affected businesses.

The company said the FTC required it to divest its Clear Lake, Texas, acrylic acid and esters plant and the related businesses in North, Central, and South America.

It is also selling the UCAR Emulsion Systems specialty latex businesses in North America and the North American hollow plastic pigment business.

Dow also said it has decided to exercise its option to have the Haas Family Trusts make an additional $500 million investment in Dow equity. This is consistent with Dow's plan to retire the bridge loan for the financing of the Rohm and Haas transaction by the end of 2009.

This will be accomplished through the sale of assets, issuance of equity and debt, and the reduction in the company's dividend to preserve cash.

On March 9, Dow Chemical agreed to go through with its purchase of Rohm and Haas, reaching a settlement after the two sides were scheduled to go to a trial over Dow's refusal to close the deal.

The companies said Rohm and Haas shareholders would receive just less than $79 a share -- $78 per share, plus a ticking fee agreed upon in the original deal.

Rohm and Haas stock, which was to cease trading on the New York Stock Exchange on Wednesday, finished up 10 cents at $78.94. Dow Chemical stock closed 4.5 percent higher at $8.81.

(Reporting by Steve James; Editing by Steve Orlofsky, Gunna Dickson and Tim Dobbyn)

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