Dow Chemical could pursue equity offering to close deal with Rohm & Haas, shareholder says

By Lisa Kerner

Charlotte, N.C., Feb. 20 - Rohm & Haas Co. shareholder Hotchkis and Wiley Capital Management suggested that Dow Chemical Co. undertake an equity offering in order to close the pending merger of the two companies.

Hotchkis and Wiley, a Dow Chemical shareholder, said it notified Dow Chemical of its interest in participating in an equity offering.

Dow Chemical has other options to close the merger on its original terms, including drawing down the bridge loan, divesting certain assets and obtaining long-term debt financing and issuing equity, Hotchkis and Wiley said in a Feb. 20 letter to Rohm & Haas chief executive officer and chairman Rajiv L. Gupta.

According to Rohm & Haas, Dow Chemical has failed to explain what it is dong to secure financing to close the merger.

Another shareholder weighs in

It was previously reported that Rohm & Haas' second-largest shareholder, Paulson & Co. Inc., suggested that Dow Chemical use the committed $13 billion bridge loan and the $4 billion convertible preferred stock financing available to it to close the acquisition of Rohm & Haas, a Philadelphia-based specialty materials company.

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, Paulson said in a letter to the company.

As previously reported, Rohm & Haas 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.

Dow Chemical had announced 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. The company also denied that it has breached the merger agreement.

Rohm & Haas has accused Dow Chemical of embarking on an "aggressive campaign" to frighten Rohm & Haas employees and customers instead of using its resources to complete the merger, according to a prior news release.

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