Rohm & Haas Sues Dow Chemical In Delaware Court

Rohm & Haas Co. (ROH) has filed a lawsuit against Dow Chemical Co. (DOW) in an attempt to force Dow to close its $15.3 billion merger agreement.

The suit, filed Monday in Delaware court, alleges Dow is intentionally breaching its obligation to complete the deal even though it has received all regulatory approvals and has the money available.

Earlier Monday, Dow confirmed that it doesn't intend to close the merger by a Tuesday deadline, with Chief Executive Andrew Liveris calling the deal "untenable at this time" in a prepared statement.

Under the agreement, Dow had two business days to complete the deal after receiving final regulatory approval, which came Friday.

The Rohm & Haas lawsuit alleges the agreement "unambiguously" requires Dow to close by Tuesday. It seeks "a decree of specific performance requiring Dow to close the merger agreement immediately."

In its announcement Monday, Dow Chemical blamed "unacceptable uncertainties on the funding and economics of the combined enterprise" for the decision to put off the deal. Factors cited by Dow include a slump in chemicals demand that started in the fall, as well as last month's implosion of Dow's planned $17.4 billion joint venture with Kuwait.

Dow had been slated to reap $9 billion from the Kuwait joint venture, known as K-Dow, and it intended to put the money toward the Rohm & Haas purchase.

But Rohm & Haas contends the merger, agreed upon in July, wasn't contingent on Dow's joint venture with Kuwait or on any specific financing agreements.

"The failure of the K-Dow venture does not provide Dow with a basis for refusing to close," the Rohm & Haas complaint notes.

It cites a $13 billion one-year loan commitment that Dow received from a group of banks in September, as well as $4 billion in extra financing from Berkshire Hathaway Inc. (BRKA BRKB) and the Kuwait Investment Authority.

"Together, these debt and preferred equity financing commitments total $17 billion - $2 billion more than the total transaction price of approximately $15 billion," the complaint notes.

Meanwhile, Rohm & Haas contends in the suit that Dow engaged in "surreptitious, wrongful and deliberate efforts" to delay antitrust clearance of the merger.

It also contends that Liveris met with Rohm & Haas executives last week and asked for an extension until June 30 to close the deal. But Liveris "refused" to commit to going through with it even if Rohm & Haas granted the extension, the suit contends.

Rohm & Haas shares were off 15.7% recently, or $10.32, at $55.50. Dow shares were off 3.7%, or 53 cents, at $13.80.

-By Bob Sechler; Dow Jones Newswires; 512-236-9637

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