(adds comments from Dow Chemical spokesman)
DOW JONES NEWSWIRES
Dow Chemical Co. (DOW) closed on its $16.3 billion acquisition
of rival Rohm & Haas Co. (ROH) on Wednesday, as the chemical
giant looks to raise cash to help reduce the deal's debt
burden.
Dow was in a vastly different position when it made its bid for
Rohm last July. The company was counting on $9 billion from the
sale of a stake in some of its plants to a Kuwaiti company, but the
joint venture fell through in late December under pressure from the
Kuwaiti government.
On top of the collapsed deal, business in the chemical sector
has soured due to the global recession.
Dow turned to a bridge loan to finance the deal with Rohm and to
help manage its debt, and has unveiled cost-cutting measures such
as a dividend cut and layoffs.
The company said Wednesday it decided to exercise its option to
have the Haas Family Trusts make an additional $500 million
investment in Dow stock, so it can stay on the path toward retiring
the bridge loan by the end of the year, as expected.
Dow spokesman Bob Plishka told Dow Jones Newswires the company
has been "working hard to fill the hole created when Kuwait pulled
out of its definitive commercial agreement to form a petrochemicals
joint venture with Dow in December."
Plishka said the company has been able to lower its debt burden
on the deal by about $6 billion, through its dividend cut,
investments by Rohm's majority shareholders the Haas Family trust
and Paulson & Co. and the divestiture of Morton Salt.
Dow looks to boost its performance products and specialty
portfolio with the deal, and said it also hopes to deliver more
consistent earnings growth.
The company said it will create a new Advanced Materials
division, of which Rohm will be the key element. Pierre Brondeau,
Rohm's chief operating officer, will serve as chief executive for
the segment, which will include coatings, building and
construction, adhesives and electronic materials.
Ratings agencies have said the deal would raise the combined
company's debt levels significantly, with deal-related debt at
about twice the level that was planned when the merger was first
announced in July.
Fitch Ratings and Standard & Poor's Ratings Services earlier
this month cut their credit ratings on Dow Chemical, while Moody's
Investors Service said Dow would need to take more steps to support
its ratings after the deal's closure.
Dow boosted its estimate for cost savings from the deal to $1.3
billion a year.
As part of its approval for the deal, the U.S. Federal Trade
Commission required Dow to divest itself of several operations,
including its North American specialty latex business and North
American hollow plastic pigment business.
Dow's shares were up 5.5% at $8.89 in recent trading, while
Rohm's shares rose 0.1% to $78.95. Rohm's shares will cease trading
at Wednesday's close.
-By John Kell and Kerry E. Grace, Dow Jones Newswires;
201-938-5285; john.kell@dowjones.com