Dow's Rohm and Haas Acquisition

In: Business and Management

Submitted By pettyychen
Words 3832
Pages 16
Executive Summary
In July 2008, Dow Chemical announced an acquisition of Rohm and Haas, a specialty chemicals producer, in an attempt to implement its new strategy of pursuing high growth businesses. The financial crisis that hit in the fall and the termination of PIC joint venture called into question Dow’s ability to finance the deal. Based on the valuation models, paying $78/share for Rohm and Haas remained a good value for Dow post financial crisis as the combined company retained its ability to generate synergies. Dow should proceed with the deal as announced to prevent costly litigations and aim for maximizing long-term shareholder value. To avoid being downgraded to junk status and incurring other concerns of financial distress, Dow should attempt to renegotiate the terms of its financing, particularly its $13 million bridge loan.

Table of Contents

I. The Firms…………………………………………………...…….p. 3 a. Dow Chemical b. Rohm & Haas c. Petroleum Industries Company II. The Acquisition……………………………………………..……p. 3-5 d. The Rationale e. The Valuation f. The Financing III. The Risks……………………………………………………….…p. 5 IV. The Financial Crisis……………………………………….……...p. 5-7 g. The Macroeconomy and Industry h. The Firms i. The Post-Crisis WACC j. The Post-Crisis Valuation k. The Post-Crisis Financing V. The Recommendations……………………………………………p. 7-8 l. The Options m. The Recommendations VI. The Results………………………………………………………..p. 8-9 VII. Exhibits………………………………………………………..…..p. 10-12

I. The Firms

A. Dow Chemical

Dow Chemical Company is a chemical manufacturing company that was founded in 1897 as a bleach manufacturing. Over the years, Dow came to be known for its product innovation, creating products such as Saran wrap and Ziploc bags. From 1983 to 2007, Dow had…...

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