UPDATE:Dow Chemical, Rohm & Haas Talk Settlement -CNBC's Faber

(Updates with analyst comments, attempts to reach companies; adds background)

Dow Chemical Co. (DOW) and Rohm & Haas Co. (ROH), due in court Monday on the $15.3 billion takeover of Rohm & Haas, are reported to be in "long-shot talks" to settle the dispute, according to a CNBC report Thursday.

Both Dow and Rohm & Haas declined to comment for Dow Jones Newswires.

The discussions hinge on a proposal from Rohm & Haas' two biggest shareholders, the Haas family trust and hedge fund Paulson & Co. The plan would have the stakeholders taking proceeds from the merger and investing the money back into the company in the form of a preferred security.

The discussions, reported by CNBC's David Faber, would be welcome, say some analysts, as a court decision could prove disastrous for either or both companies.

"Although (Rohm & Haas) appears to have a credible claim for the court to order Dow to close the merger, we believe that relevant case law provides (Dow) with a strong argument that the court will not necessarily grant specific performance," Len Levy, an analyst for ICAP, said in predicting a settlement. "In the event of a settlement, we believe the most likely outcome would be a re-pricing; however, in the event the case is decided by the court, we believe that there is a greater probability that the court will not issue an order against DOW to close the merger."

Shares of Dow dropped 8.1% to $6.49 in recent trading Thursday afternoon, while Rohm & Haas traded at $54.43, down 1.4%, and well below Dow's $78-per-share offer. But shares of Rohm & Haas have been falling much harder earlier Thursday, down 7.1% at one point.

A settlement probably would have a certain appeal for Dow Chemical, which has spent a lot of time trying to seal court documents and prevent key business information from becoming public. And Judge William Chandler, who is to hear the case next week, has reminded the parties numerous times that they should figure out a "business solution."

Citing sources familiar with the situation, CNBC's Faber reported that Dow is believed to be meeting a ratings agency Thursday to determine whether the plan could help prevent a possible credit downgrade.

-By David Benoit, Dow Jones Newswires; 201-938-2472; [e-mail]

(Heidi N. Moore contibuted to this report.)