Dow Chemical Acquires Rohm and Haas: A Case Study

Topics: Dow Chemical Company Pages: 69 (11245 words) Published: September 19, 2015
For the exclusive use of Y. Li, 2015.

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REV: MAY 20, 2014


Dow’s Bid for Rohm and Haas
The acquisition of Rohm and Haas is a defining step in our transformational strategy to shape the “Dow of Tomorrow”—a high-value, diversified chemical and materials company creating the largest specialty chemicals company in the United States with a leading global position in performance products and advanced materials.

Andrew Liveris, Dow Chemical CEO1
We strongly believe that by becoming part of Dow, we secure a brighter future and greater growth prospects for our employees . . . This was the right transaction, with the right company, and with a good friend, Andrew.

Raj Gupta, Rohm and Haas CEO2
The CEO of the Dow Chemical Company (Dow), Andrew Liveris, had been working for the past four years to transform Dow from a producer of low-value, highly cyclical commodity chemicals into a producer of high-value specialty chemicals and advanced materials. But as the U.S. subprime mortgage crisis evolved into a financial crisis and then into a global economic recession over the course of 2008, two key deals—the cornerstones of his transformation strategy—fell apart. First, Kuwait’s Petrochemical Industries Company (PIC) terminated a proposed joint venture with Dow in December 2008, a deal that was supposed to generate $7 billion of cash. This cash, in turn, could have been used to finance Dow’s second deal, the pending acquisition of specialty chemical maker Rohm and Haas (Rohm) for $18.8 billion. To make matters worse, Dow was about to report a fourth quarter loss of $1.6 billion, further reducing its cash flow and its options. Given these events, Dow announced that it was refusing to close the Rohm acquisition on January 26, 2009. Within hours, Rohm sued Dow to force it to complete the acquisition as required by the merger agreement. Liveris now had to decide what to do about the Rohm acquisition and the lawsuit as well as the PIC joint venture and the company’s growing operating losses.

________________________________________________________________________________________________________________ Professor Benjamin C. Esty and Global Research Group Senior Researcher David Lane prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, so urces of primary data, or illustrations of effective or ineffective management. We would like to thank Guhan Subramanian and Steven Davidoff for helpful conversations about the legal issues in this case, and Chris Allen and Kathleen Burke Ryan for assistance with collecting data and verifying sources.

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This document is authorized for use only by Yang Li in Valuation taught by Shyam Venkatesan, Tulane University from August 2015 to February 2016.

For the exclusive use of Y. Li, 2015.

Dow's Bid for Rohm and Haas

The Dow Chemical Company
Dow was founded in 1897 by Herbert Dow as a manufacturer of commercial bleach. After merging with Midland Chemical in 1900, it branched out into agricultural and food products. A century later, Dow still maintained its headquarters in Midland, Michigan, and was the only Fortune 200 firm to have paid a dividend for 388 consecutive quarters (since 1912) without interruption or reduction. By 2008, Dow had 46,000 employees and was the world’s largest producer of polyethylene and polystyrene resins (used, for example, to make plastic bags and Styrofoam, respectively). Over the...
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