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11 July 2008


Dow acquiring Rohm and Haas for $18.8bn

The Dow Chemical Company of Midland, MI has agreed to acquire Rohm and Haas Company of Philadelphia, PA for $78 per share in cash.

Dow (which has annual sales of $54bn) reckons that the acquisition of Rohm and Haas (which has annual sales of $8.9bn) will make it the world’s leading specialty chemical and advanced materials company, combining the two organizations’ best-in-class technologies, broad geographic reach and industry channels to create a business portfolio with significant growth opportunities.

Rohm and Haas brings access to new technologies complementary to Dow’s existing platforms and offers extended reach into emerging geographies, says Dow’s chairman and CEO Andrew N. Liveris.

In particular, Dow says that the acquisition strengthens and expands its specialty business and results in a step towards establishing it as an earnings-growth company with reduced cyclicality, shifting its portfolio towards higher-growth, higher-margin specialty businesses.

Dow reckons that Rohm and Haas provides an excellent position in industry segments that are poised for significant growth given long-term market trends, notably in the electronic materials market. Rohm and Haas’ Electronic Materials division, in particular, includes microelectronics technologies such as providing precursors for metalorganic chemical vapor deposition.

Rohm and Haas, coupled with the pending joint venture between Dow and Petrochemical Industries Company of the State of Kuwait (PIC) announced last December, should raise performance products and advanced materials from 51% to 69% of Dow’s total sales, on a 2007 pro forma basis. Financing for the acquisition includes an equity investment by Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred securities for $3bn and $1bn, respectively.

“Rohm and Haas will be a critical component of the new Dow, the world’s pre-eminent chemical company and will be aligned with a forward-looking US-based enterprise, committed to investing in research for new technology,” says Rohm and Haas’ chairman and CEO Raj L. Gupta. “By becoming a part of Dow, we secure a brighter future and greater growth prospects for our employees,” he adds.

Dow says that it will establish an advanced materials business unit at Rohm and Haas’ headquarters in Philadelphia (retaining Rohm and Haas’ corporate name) and contribute complementary Dow specialty chemicals business segments to Rohm and Haas’ existing portfolio.

Through the application of each firm’s technologies and as a consequence of the combined businesses’ broader product portfolio in key industry segments with strong global growth rates, Dow expects the transaction to produce significant revenue synergies. In particular, the annual revenue of Rohm and Haas will approach $13bn.

Dow also expects the transaction to be accretive to earnings in the second year following completion, with pre-tax annual cost synergies expected to be at least $800m per year. Key areas of cost savings include increased purchasing power for raw materials; manufacturing and supply chain work process improvements; and the elimination of redundant corporate overhead for shared services and governance.

Dow’s board will expand to 14 with the addition of two Rohm and Haas directors. The transaction has been approved by the boards of both firms, but remains subject to approval by Rohm and Haas shareholders. Completion is targeted for early 2009.

See related items:

Rohm and Haas launches enhanced version of MO precursor central delivery system

Rohm and Haas divests stake in precursor manufacturer UP Chemical

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