Dow could close on Rohm & Haas; Pfizer looks for targets; Borders, Tyson make leadership changes

By Cristal Cody

New York, Jan. 5 - Dow Chemical Co. is expected to close this week on the acquisition of Rohm & Haas Co., while Pfizer Inc. is looking for acquisitions.

Also on Monday, management shakeups took hold at Tyson Foods Inc. and Borders Group Inc., signaling possible situations in the future.

Moving to Wall Street, the markets slipped after Friday's uptick.

The Dow Jones Industrial Average shed 81.80, or 0.91%, to close Monday at 8,952.89.

The Standard & Poor's 500 index fell 4.35, or 0.47%, to 927.45, and the Nasdaq Composite index fell 4.18, or 0.26%, to 1,628.03.

Dow said to talk Tuesday

Rohm & Haas is expected to receive regulatory approval this week from U.S. and European Union regulators, and Dow is expected to release a statement before Tuesday's opening bell.

Dow agreed in July to acquire Rohm & Haas for $78.00 a share in cash. The purchase price increases every day if the deal does not close by Saturday.

Many were unsure whether Dow would go ahead with the $15.3 billion deal after its $17.4 billion joint venture with Kuwait's Petrochemical Industries Co. collapsed.

Dow's options include renegotiation and terminating the deal, but one is unlikely and the other comes with a hefty fee.

"Dow has its work cut out to achieve more favorable terms from Rohm and Haas," Jeffrey Zekauskas, an analyst with JPMorgan Chase & Co., said in an investor's note. "It is difficult to envision clearly how Dow can reach better terms with ROH."

The merger agreement includes a termination fee of up to $750 million payable by Dow and up to $600 million payable by Rohm & Haas.

Dow plans to draw down a $13 billion bridge loan with a one-year term to finance the acquisition and may seek additional equity financing for more room under the covenants.

"We would expect Dow to refinance a good part of the bridge during 2009 (raising its borrowing costs) and not delay refinancing to 2010 given its size," Zekauskas said. "The stress of the transaction is not a matter of Rohm and Haas but of the pressures of the global slowdown, commodity overcapacity and the frozen and expensive character of the credit markets."

Rohm & Haas shares fell 94 cents, or 1.45%, to close Monday at $63.82.

Dow's stock fell 36 cents, or 2.34%, to close at $15.05.

Pfizer eyes rivals

Pfizer is said to be on the lookout for acquisition targets.

Chief executive officer Jeff Kindler said in U.K. interviews that the New York-based drug company is looking at targets of all sizes to grow revenue.

"Essentially, they could do any medium- to smaller-sized acquisitions they wanted," Jon Lecroy, an analyst with Natixis Bleichroeder, told Prospect News. "A bigger acquisition in these credit markets would have to be more of a merger in equals."

Pfizer's name is thrown out weekly for possible deals, he said.

"Right now, we're not expecting them to make any big acquisitions in the near term," Lecroy said. "Most of the companies are facing pressure about the same time and are losing their big products early in the next decade. We're seeing cost cutting and smaller acquisitions and that's what I would expect to continue."

Pfizer and other drug manufacturers will lose patent protections on some of their big sellers in 2011.

Pfizer shares lost 11 cents, or 0.60%, to close Monday at $18.16.

Borders shakeup

Borders Group announced several management changes on Monday, including a new CEO, to "more aggressively drive a turnaround of the company within today's challenging economy."

Ron Marshall, who most recently was the founder of private equity firm Wildridge Capital Management, replaced George Jones as the new president and CEO. Jones had held the positions since 2006.

The shakeup came as the company reported a 14.4% drop among Borders superstores over the nine-week period that ended on Saturday.

Ann Arbor, Mich.-based Borders also faces a possible delisting from the New York Stock Exchange because the company's stock has fallen below the $1.00 price threshold over the 30-day time limit.

The company operates more than 1,100 stores under the Borders and Waldenbooks brands.

Marshall is credited with turnarounds at Nash Finch Co. and at supermarket retailer Pathmark Stores Inc.

"Progress has been made by Borders Group over recent quarters within the challenging economy to reduce debt, improve cash flow, cut expenses, enhance inventory productivity and improve margins, but it is imperative that the company more aggressively attack these initiatives to address its long-term future," Borders chairman Larry Pollock said in a statement.

Shares of Borders gained 13 cents, or 28.89%, to close Monday at 58 cents a share. The stock has traded as low as 34 cents and as high as $11.60 over the past year.

Tyson CEO steps down, company in limbo

Also on Monday, Tyson Foods' president and CEO, Dick Bond, resigned effective immediately to pursue other interests.

Tyson, the world's largest meat company, had been expected to continue to use cash to acquire poultry farms and processing plants in the United States and overseas.

Tyson said that Leland Tollett, who was the company's chairman and CEO from 1991 to 1998, will take over as interim leader, but that doesn't give investors much confidence.

"The main claim to fame for Tyson during that period was its 1992 acquisition of Artic Alaska Seafood - one of the worst acquisitions in the corporation's history," said Timothy Ramey, an analyst with D.A. Davidson & Co. "We believe Tyson will be in a state of limbo until a new permanent CEO can be named."

The industry already was shaken in December when Pilgrim's Pride Corp. filed for bankruptcy protection.

Tyson shares fell 56 cents, or 5.99%, to close Monday at $8.79.

Mentioned in this article:

Borders Group Inc. NYSE: BGP

Dow Chemical Co. NYSE: DOW

Pfizer Inc. NYSE: PFE

Rohm & Haas Co. NYSE: ROH

Tyson Foods Inc. NYSE: TSN

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