(Adds background and Dow comment on rating cut, updates stock
prices)
Dow Chemical Co. (DOW) and Rohm & Haas Co. (ROH) confirmed
Friday they are in discussions about their proposed $15.3 billion
merger and the pending lawsuit related to the deal.
Shares of Dow, which have been pummeled in recent months on
concerns about the company possibly being forced by court order to
close the deal, were recently up 7% at $6.92. Rohm gained 16% to
$62.54, getting the stock closer to Dow's $72 offer price. Dow's
shares have lost more than half their value so far this year.
Dow and Rohm & Haas are locked in a court battle after Dow
said in January it wouldn't close the acquisition on time. Dow has
said it was still interested in completing the debt-fueled deal but
that doing so now without firm long-term financing in place would
put the combined company's future in question.
The trial is slated to start Monday, and the judge will rule on
whether Dow should be forced to complete the deal, not its ability
to finance it.
Dow slashed its quarterly dividend 64% to 15 cents a share last
month, confirming market expectations that the company would need
to do so amid the slump in chemical demand and would need to save
money ahead of the deal.
Standard & Poor's Ratings Services cut its short-term
ratings on Dow earlier Friday on higher potential for near-term
weakness because of the takeover.
Dow later said it was encouraged that its talks with ratings
agencies haven't resulted in any changes to its long-term corporate
rating. The company added it is still focused on financial
flexibility and maintaining its investment-grade rating. If those
goals can't be accomplished, it said it would proceed with the
trial.
The industry's woes and continuing credit crunch threw a wrench
into Rohm & Haas' deal to be acquired by Dow, following the
Kuwaiti government's withdrawal from a planned $17.4 billion joint
venture with Dow. Dow was left with a $9 billion shortfall due to
the joint venture's collapse.
Separately, Dow said it has reached an agreement with lenders
that lowers the size of a term loan taken out to partially finance
the purchase by $500 million to $12.5 billion.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com
(Brian Kalish contributed to this story)