Dow Chemical to buy Rohm & Haas

Midland, Michigan -- Dow Chemical Co. plans to acquire Rohm & Haas Co., a speciality chemical and materials conglomerate that supplies adhesives and additives to the rubber industry, in a deal Dow expects will help it lift sales and profits.

The $18.8 billion sale is expected to close in early 2009, company officials said.

Besides to basic polymers and engineering resins, Dow has a sizable stake in plastics additives. Its portfolio includes plastomer and copolymer polymer modifiers, biocides, divinylbenzene crosslinker, lubricants, polyolefin dispersions, propylene glycol copolymer antistats and scratch preventers, functional polymers that enhance performance and physical blowing agents.

Rohm & Haas's additives lineup includes its widely used acrylic-based impact modifiers and process aids for vinyl and other plastics, heat stabilisers and lubricants for vinyl, specialty waxes, plasticisers and anti-microbial agents. The Philadelphia-based firm has an extensive polymers profile but most are aimed at speciality applications such as coatings and other industrial uses. It exited the acrylic sheet business 10 years ago.

Dow's per-share offer of $78 was a 74 percent premium over Rohm & Haas's closing price on July 9. The premium reflects the faith Dow has in the company, which only became open to a takeover three weeks ago, according to Andrew Liveris, Dow chairman and CEO.

The purchase of Rohm & Haas, combined with Dow putting its basic plastics business in a Kuwait joint venture, will push Dow's performance products and advanced materials portfolio to 69 percent of sales from 51 percent last year.

Other areas that attract Dow are water solutions, adhesives, personal care, biocides, and building and packaging materials. Dow is active in these areas as well and as a basic materials supplier it can be downstream integrated with much of Rohm & Haas's production. Dow, for example, is a major propylene glycol and acrylates supplier, materials widely used by Rohm & Haas.

The two firms have potential synergies in specialty packaging, Liveris told analysts and investors. Dow's Infuse olefin block copolymer could be married with Rohm & Haas adhesives expertise to enhance that company's specialty packaging applications.

Dow will pay cash for its stake in Rohm & Haas. Also buying in are investment firm Berkshire Hathaway and the Kuwait Investment Authority, which are putting up $3 billion and $1 billion, respectively.

From Rubber & Plastics News (A Crain publication)