Nero Burns Rohm & Haas (ROH, DOW)

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Rohm & Haas Co. (NYSE: ROH) is probably upsetting some who chased the move on Friday who were hoping its buyout might actually close.  But this morning the company announced that it has been advised by Dow Chemical (NYSE: DOW) that Dow does not intend to close the pending acquisition on or before the January 27 deadline now that regulatory approval has been given.

Rohm and Haas intends to pursue all availablealternatives to protect its shareholders’ interests, which essentiallymeans that it will sue to force the merger completion or that it willpursue a break-up fee and possibly punitive damages from the largerchemicals player.

Dow did not even state that it would like to pursue the merger at alower price.  It seems the chemicals giant just wants out of the deal.In the current environment it almost certainly NEEDS to be out of thedeal. 

This should not be a shock nor a surprise.  Itseems that the whole way through the last few months that about thebest thing that could or would happen would be that Rohm & Haas wouldget a revised-lower takeover offering price from Dow.  Dow Chemicalcan’t honestly claim that it was caught by surprise by the economy.  But after the Kuwaitis backed out of their deal and in thecurrent credit environment, it is hard to imagine that this deal couldhave easily closed.  It would leverage the Dow books by too much andwould come at a time when the cost of borrowing is just far too great.

Dow is just going to have to pay Rohm & Haas that $750 millionbreak-up fee.  About all Dow can hope for here is that Rohm & Haasdoesn’t go too hard after it for business disruption damages above andbeyond those break-up fees.

Rohm & Haas shares are trading down 16% at $55.00 right at the open.   

Jon C. Ogg
January 26, 2009