Dow Chemical fights attempt by Rohm & Haas to force merger to close

By Lisa Kerner

Charlotte, N.C., Feb. 3 - Dow Chemical Co. filed its response to Rohm & Haas Co.'s litigation in the Court of Chancery of the State of Delaware.

Rohm & Haas wants the court to force Dow Chemical to complete its $78-per-share acquisition of Rohm & Haas under the companies' July 10, 2008 merger agreement, according to Dow Chemical's filing. A ticking fee of $3.3 million per day payable by Dow Chemical to Rohm & Haas shareholders began on Jan. 10 as part of Rohm & Haas' lawsuit.

In its response, Dow Chemical denies that all conditions to its obligation to close the merger have been satisfied and denies that it has breached the agreement, intentionally or otherwise.

Dow Chemical said "a confluence of dramatic and unforeseeable shocks" to the company, the chemical industry, banks and financial markets make it impossible to complete the merger without jeopardizing the existence of Dow Chemical and Rohm & Haas.

Acquiring Rohm & Haas, a Philadelphia-based specialty materials company, could also lead to a downgrade of Dow Chemical's credit rating and result in the default on multiple billions of dollars of acquisition debt, Dow Chemical said.

Dow Chemical, a Midland, Mich.-based chemical company, previously announced it would not complete its acquisition of Rohm & Haas by Jan. 27 as required under the terms of the companies' merger agreement due to market conditions and the failure of Petrochemicals Industries Co. of Kuwait to complete the K-Dow joint venture.

Rohm & Haas says Dow can do more

Rohm & Haas said it has tried to understand the difficulties faced by Dow Chemical and to "develop a path to a satisfactory resolution" to close the merger. Litigation was the only viable option left, Rohm & Haas said in a Feb. 3 letter to Dow Chemical.

Following hours of meetings on three separate occasions, Dow Chemical suggested delaying the closing until June 30, when Dow Chemical would be "better positioned to decide if it would honor its obligation to close," according to a Rohm & Haas statement released on Tuesday.

Rohm & Haas said that because Dow Chemical agreed to take all necessary action to obtain financing for the merger, it should, among other things:

• Cease the declaration or payment of any cash dividend, other than a penny per share;

• Actively pursue asset sales of Dow Chemical's and Rohm &Haas' businesses and divisions;

• Pursue all options to raise equity in private or public markets, including underwritten and private placements and rights offerings, and all forms of securities;

• Pursue all options to extend the existing $13 billion revolving credit agreement or to seek waivers; and

• Evaluate and pursue all available financing options in the event that Dow Chemical is unable to retain its investment-grade credit rating.

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