Rohm & Haas shareholder says Dow Chemical has ability to complete merger

By Lisa Kerner

Charlotte, N.C., Feb. 5 - Rohm & Haas Co.'s second-largest shareholder, Paulson & Co. Inc., said that Dow Chemical Co. should use the committed $13 billion bridge loan and the $4 billion convertible preferred stock financing available to it to close the company's pending acquisition of Rohm & Haas.

Paulson suggested in a Feb. 4 letter that Dow Chemical could then retire the bridge financing by reducing its dividend to one cent per share, selling $4 billion of new common equity and raising $5 billion in the bond market.

By taking these steps, Paulson said, "Dow Chemical could repay the bridge financing by $10 billion, easily facilitating the financing for the acquisition."

Rohm & Haas, a Philadelphia-based specialty materials company, had also suggested that Dow Chemical reduce its dividend and pursue all options to raise equity in private or public markets.

According to Paulson, "Dow Chemical currently has financing in place to complete the acquisition and the combined Dow Rohm & Haas will have numerous alternatives to refinance the bridge loan."

Rohm & Haas has asked the Court of Chancery of the State of Delaware to force the Midland, Mich.-based chemical company to complete its $78-per-share acquisition of Rohm & Haas under the companies' July 10, 2008 merger agreement.

As previously reported, Dow Chemical said it could not complete the acquisition by Jan. 27 as required under the agreement due to market conditions and the failure of Petrochemicals Industries Co. of Kuwait to complete the K-Dow joint venture.

Dow Chemical has denied that all conditions to its obligation to close the merger have been satisfied and denied that it has breached the merger agreement. The company blamed "a confluence of dramatic and unforeseeable shocks" to the company, the chemical industry, banks and financial markets for its inability to close the deal without jeopardizing the existence of both companies.

Paulson, an investment management firm, said InBev NV/SA was able to acquire Anheuser-Busch Cos., Inc. in the midst of the credit crisis by drawing down bank financing. The combined company raised $9.8 billion in an equity offering to completely repay bridge financing and later sold approximately $7.5 billion in two debt offerings to repay short-term debt, Paulson said.

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