Dow, Rohm and Haas Agree to New Buyout Terms

The Dow Chemical Company on March 9 announced that it has reached agreements with Rohm and Haas and certain of its shareholders that permit Dow to close the acquisition on substantially altered financial terms by April 1.

The agreement resolves litigation initiated by Rohm and Haas against Dow on Jan. 26, 2009. The company filed the lawsuit to force Dow to follow through on its plans to buy Rohm and Haas.

"Dow has taken the time and steps necessary to close this transaction on substantially improved financial terms to the company, despite the continuing financial and economic uncertainty facing our world. The strategic benefits of the acquisition of Rohm and Haas have never been in question; just the path to completing the deal," said Dow Chair and Chief Executive Officer Andrew N. Liveris.

As part of the agreement, Rohm and Haas' two largest shareholders have agreed to purchase $2.5 billion in face value of perpetual preferred equity issued by Dow. In addition, one of the shareholders, the Haas Family Trusts, has agreed that at Dow's option, they will make an investment in an additional $500 million of Dow's equity. These equity investments substantially reduce the debt financing required to fund the acquisition, Dow has restructured the transaction to essentially pay the equivalent of $63 per share in cash, and $15 per share in face value of preferred equity securities.

To fund the acquisition of Rohm and Haas, Dow will use the proceeds from the equity issuances to reduce the amount it would otherwise be required to draw down from the $12.5 billion bridge loan, which was renegotiated to provide a one-year extension on $8 billion of the total loan. The financing for the acquisition also includes equity investments of $3 billion by Berkshire Hathaway and $1 billion by the Kuwait Investment Authority (KIA) in the form of convertible preferred equity.

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