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Dow/Rohm And Haas Update

Dow works overtime to complete deal with financing that will preserve its credit rating

by Alexander H. Tullo
February 16, 2009 | A version of this story appeared in Volume 87, Issue 7

Dow Chemical is struggling to break out of the financial dilemma of completing its $18.8 billion acquisition of Rohm and Haas in an environment where the banking system continues to go downhill.

The chemical giant is being squeezed between Rohm and Haas and the credit rating agencies. The agencies are threatening to lower Dow's debt rating unless it finds better financing than a $13 billion bridge loan that expires in April 2010.

But last week, Rohm and Haas repeated that it "believes that Dow has the resources and flexibility to live up to its obligations under the merger agreement." In a letter to Dow, Rohm and Haas's board rejected meetings between high-ranking executives because past meetings failed to provide "meaningful details of what Dow is doing to secure financing."

Dow is trying to scrape together funds to plug the $9 billion hole left when Petrochemical Industries Co. (PIC) of Kuwait pulled out of buying half of Dow's petrochemical business. Late last week, Dow told shareholders it is cutting its quarterly dividend from 42 cents, down to 15 cents per share. This is the first time since 1912 that Dow hasn't either maintained or increased its dividend.

Dow is pursuing arbitration against PIC and has filed a lawsuit against "other Kuwaiti parties" to recover more than $2.5 billion in total. It is in face-to-face negotiations with some of the roughly dozen companies that have expressed interest in the petrochemical business.

And according to a report in the Financial Times, the Kuwait Investment Authority (KIA), which already pledged $1 billion to finance the PIC deal, may be willing to offer more money to get it done but only on terms that reflect the weaker economy. A Dow spokesman tells C&EN that "Dow hasn't been formally approached by KIA with any revised offer."


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