Dow Closes $16.5 Billion Rohm & Haas Buyout

Deal will allow Dow to expand in the high-margin specialty chemicals market and move away from the commodities chemical market.

MIDLAND, Mich. (AP) -- Dow Chemical Co. said Wednesday it has closed on it $16.5 billion buyout of Rohm & Haas Co., a deal that it hopes will fuel growth in the high-margin specialty chemicals market.

Rohm & Haas will form the core of a new advanced materials unit that is expected to have $14 billion in annual sales, Midland, Mich.-based Dow said.

The Rohm & Haas brand will disappear and its stock will cease trading on Wednesday, Dow said.

"The closing of this transaction strongly positions Dow for the future by transforming our business portfolio," Dow Chairman, Chief Executive and President Andrew Liveris said in a statement. "We are committed to delivering on a clear and measurable plan designed to meet the needs of our investors, employees, customers and suppliers, even in this current challenging macroeconomic environment."

Dow's executives have "got a lot of work ahead of them," said Gabelli & Co. analyst Robert Felice.

Dow took on much more debt than originally planned for the Philadelphia-based company, a negative on Wall Street amid the financial downturn. Additionally, much of the funding for the deal came from a $10 billion loan that becomes much more expensive after a year.

A successful integration is necessary to boost sales and reduce that burden, Gabelli said.

Dow first proposed the deal last July as part of a plan to focus on specialty chemicals and spin off its commodities business in a joint venture with a Kuwaiti company. However, the Kuwaiti company pulled out of the joint venture late last year, denying Dow more than $5 billion in cash it had expected to use to buy Rohm & Haas.

Dow then tried to delay the deal, a decision that led Rohm & Haas to sue in a Delaware court. Both companies settled just before the trial was set to start last month.

To save cash and make the integration as seamless as possible, Dow cut its dividend, moved to lay off thousands of Rohm & Haas workers and announced plans to sell several Rohm assets, including Morton Salt.

Dow confirmed Wednesday that its agricultural unit -- which has performed well, despite the recession -- will not be sold.

Dow expects the Rohm & Haas deal to result in cost savings of about $1.3 billion.

Shares of Dow rose 44 cents, or 5.2 percent, to $8.87 in afternoon trading. Shares of Rohm & Haas rose 10 cents to $78.94.

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