Dow fights off Rohm & Haas; PharmaNet shares soar on cash bid; Puget buyout on track to close Friday

By Cristal Cody

New York, Feb. 3 - Dow Chemical Co. said Tuesday the merger agreement to acquire Rohm & Haas Co. does not contain a Jan. 27 mandatory closing date and the companies' combination in current market conditions would do more harm than good.

Dow made its feelings known in a legal response to a Delaware lawsuit filed by Rohm & Haas to force the $15.4 billion merger to go through.

Also on Tuesday, a $5.00-a-share cash offer to take PharmaNet Development Group Inc. private sent the company's stock up $3.30, or 246.27%, in trading.

Coming up in other deals, the $7.4 billion acquisition of Bellevue, Wash.-based Puget Energy, Inc. and subsidiary Puget Sound Energy, Inc. remains on track to close Friday, a market analyst who follows the company said in an interview.

On Wall Street Tuesday, the Dow Jones Industrial Average rose 141.53 points, or 1.78%, to close at 8,078.36.

The Standard & Poor's 500 index gained 13.07 points, or 1.58%, to finish at 838.51, and the Nasdaq Composite index rose 21.87 points, or 1.46%, to 1,516.30.

Dow digs in for standoff

Dow said last month it could not close the Rohm & Haas acquisition after a Kuwait joint venture fell apart in late December. Dow had expected to use some of the joint venture cash proceeds to close the $78.00-a-share buyout of Rohm & Haas.

Dow chief executive Andrew Liveris said Tuesday on an earnings conference call that the company will seek damages of more than $2.5 billion through arbitration and litigation from the termination of the joint venture by Petrochemical Industries Co. of Kuwait.

"We know we have to get our house in order before we resume our strategy," Liveris said.

"A key part of that strategy was growth. We still think the Rohm & Haas acquisition is consistent with our long-term strategy. The bottom line is we must do what is right for all the stakeholders, and we don't see an appropriate path to closing the Rohm & Haas acquisition at this time."

Liveris said Dow is ready to work with Rohm & Haas to find a solution outside litigation.

A trial has been set for March 9 in Delaware Chancery Court on Rohm & Haas' lawsuit to force the merger to go through.

Frank Mitsch, managing director at BB&T Capital Markets, said Tuesday in a research note that "essentially, Dow believes [Rohm & Haas'] complaint is saying 'tough luck' to its own employees."

Rohm & Haas said in a statement Tuesday that Dow has several options to close the deal, including an end to cash dividends.

"There are multiple steps Dow can and should immediately take to reduce its dependence on the bridge loan and secure the financial strength of the merged company. We are convinced that Dow has the ability to close the deal and succeed," Rohm & Haas said.

Dow also on Tuesday reported a fourth-quarter loss of $1.68 per share, compared with earnings of 49 cents a share in the fourth quarter of 2007. For fiscal 2008, Dow had earnings of $579 million, or 62 cents a share, compared with $2.9 billion, or $2.99 a share, in 2007.

The company said it had fourth-quarter expenses of $69 million related to the Kuwait joint venture and $31 million in legal and transaction expenses for the Rohm & Haas acquisition.

"We expect the stock to trade down today" because of the earnings results, Jeffrey Zekauskas, an analyst with J.P. Morgan Services Inc., said in a research note on Tuesday.

However, Dow shares rose 30 cents, or 2.71%, to close at $11.35.

Shares of Rohm & Haas jumped $2.00, or 3.85%, to $54.00 in trading.

PharmaNet cashes in

Shares of PharmaNet Development Group gained $3.30, or 246.27%, to close at $4.64 Tuesday, a significant premium to the stock's closing price of $1.34 on Monday.

PharmaNet agreed to be taken private by JLL Partners Inc. and affiliates through a $5.00-a-share cash tender offer.

The deal values PharmaNet's stock at about $100 million and will be financed by a $250 million equity commitment from JLL Partners.

The offer is expected to close in March.

The transaction is subject to shareholder and regulatory approvals. PharmaNet representatives were not immediately available for additional information.

Puget to close Friday

Puget Energy's $30.00-a-share cash buyout is expected to close on time, and the company has received all regulatory and shareholder approvals.

Puget shares fell 29 cents, or 0.99%, to close at $29.15 on Tuesday.

"Every indication is that the financing is in place, but the stock market is suspect about that issue and [that] is why it's selling at discount," said James Bellessa, an analyst with D.A. Davidson & Co.

Puget's new owners will include Macquarie Infrastructure Partners, the Canada Pension Plan Investment Board and British Columbia Investment Management Corp.

"I'm betting the company will be a private company by the end of the week," Bellessa said.

Mentioned in this article:

Dow Chemical Co. NYSE: DOW

PharmaNet Development Group Inc. Nasdaq: PDGI

Puget Energy, Inc. NYSE: PSD

Rohm & Haas Co. NYSE: ROH

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