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By Michael Erman
NEW YORK Dec 30 Dow Chemical Co (DOW.N) may be
looking to coax Rohm & Haas ROH.N back to the table to
renegotiate its $15.3 billion takeover of the specialty
chemicals company, but the No. 1 U.S. chemical company has
The deal signed by the two companies in July heavily favors
Rohm & Haas, and Rohm's incentive to renegotiate the
$78-a-share cash bid is limited.
The deal came under question earlier this week, when Kuwait
scrapped a $17.4 billion joint venture whose proceeds Dow had
planned to use to pay down some of the resulting debt.
While Dow still has the financing necessary to complete the
transaction, some analysts and investors have questioned
whether it would want to do so without the Kuwaiti cash.
But the terms of the deal leave Dow with very limited
recourse, said Joel Greenberg, co-chair of law firm Kaye
Scholer LLP's corporate and finance department.
"Looking at the agreement quickly, the only course that
might give them some way out is if the antitrust authorities
raise a big problem," he said. "Even there, they've got to be
willing to litigate for a while with the government."
Dow could also try to prove that Rohm had suffered a
material adverse change to its business since signing the deal,
but the merger agreement limits the circumstances under which
Dow can claim such a change took place.
Under the terms of the deal, Dow can't claim the financial
crisis or weakness in the specialty chemicals sector in general
caused such a hypothetical deal-breaking change.
Moreover, a ruling in a previously contested chemicals deal
-- Hexion's scuttled takeover of Huntsman Corp (HUN.N) -- could
make it even less likely that Dow would try to prove that Rohm
had suffered such a change.
"In light of the opinion in Huntsman, I think buyers need
to be very wary of willfully breaching an agreement" said
A Delaware Chancery Court judge ruled that if Hexion --
controlled by private equity firm Apollo Management LP --
walked away from its agreement to buy Huntsman, it could be
subject to damages above and beyond the breakup fee in the
"After that decision, I think people are very, very
cautious about walking away from a deal," Pierce said.
Dow offered to buy Rohm & Haas in July, before credit
markets froze and the stock market collapsed. Rohm & Haas was
hotly pursued, which led to both a steep 74 percent premium for
the company and an airtight merger agreement.
Dow has not indicated that it is looking to walk away from
the deal. But earlier in December, Dow CEO Andrew Liveris said
the company had "examined all sorts of ways to look at the Rohm
& Haas transaction in the context of today's economic
Both companies declined to comment.
Some of the largest banks in the business could also be
hurt if the Rohm & Haas deal falls apart. Citigroup (C.N) and
Merrill Lynch MER.N, for instance, advised Dow on both the
Kuwaiti deal and the Rohm & Haas deal. (To see a full list of
advisors, go to
Credit Suisse analyst John McNulty said he believed the
deal would likely close at or near the $78-a-share mark, but
the stock could remain under pressure given the failure of
other chemicals deals and the possibility of lengthy
Shares of Rohm & Haas fell sharply on Monday after Dow's
Kuwaiti joint venture fell through. The company's shares
recovered somewhat on Tuesday, rising $6.36, or 11.9 percent,
to close at $59.70, but are still well below the deal value.
Nevertheless, the company could still come out on top.
"They were clearly competently represented," said Kaye
Scholer's Greenberg. "I'd tell them to hold steady."
(For more M&A news and our DealZone blog, go to
(Reporting by Michael Erman; Editing by Gary Hill)