UPDATE: Dow Completes $16.3 Billion Acquisition Of Rohm & Haas

(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; [e-mail]