April 2, 2009 / 2:14 AM / 10 years ago

Dow Chem buys Rohm and Haas

NEW YORK (Reuters) - Dow Chemical Co (DOW.N) completed its more than $15 billion acquisition of Rohm and Haas ROH.N on Wednesday, and immediately sold off Morton Salt as part of a plan to scale back debt stemming from the merger.

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

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.

Right away, Dow sold the Rohm and Haas salt business, Morton Salt, to Germany’s K+S AG SDFG.DE in a $1.68 billion deal that it expects to close in mid-2009.

The sale of Morton Salt business, which was founded in 1848, is part of a plan by Dow to lower its debt, which has become an issue for some investors and analysts with the acquisition of Rohm and Haas.

“This sale puts us ahead of schedule on our de-leveraging plan post the close of the Rohm and Haas acquisition,” Dow Chief Executive Andrew Liveris said in a statement.

K+S said last month that it was evaluating takeover targets to bolster its salt production, which is second only to state-owned China National Salt Industry Corp, according to 2007 production figures.

But most expected the company to make a bid for Compass Minerals International Inc (CMP.N), the second-biggest U.S. salt producer, behind privately held Cargill.

Earlier on Wednesday, 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.

Dow is likely to sell other businesses, either to deleverage or appease anti-trust regulators. Indeed, the company 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 and Paul Thomasch; Editing by Gunna Dickson, Tim Dobbyn and Lincoln Feast

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