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Monday, October 19, 2009

Gupta reflects on Dow's acquisition of Rohm & Haas

Was DuPont Co. interested in buying Rohm & Haas Co.?

It was at one time, according to an interview with former Rohm & Haas chairman and CEO Raj L. Gupta in the latest issue of Directors & Boards magazine.

Gupta told the Philadelphia-based trade publication that Dow Chemical Co., BASF and DuPont each had “told us over the past 10 years that they were doing their homework on us and would be ready if ever there was an opportunity.”

Gupta said he told the CEOs of all three chemical companies at an industry conference in California in June 2008 that Rohm & Haas’ board “might be interested in looking at options.”

BASF and Dow would go on to make bids, but not DuPont. “DuPont had begun moving in a different direction with its strategy,” Gupta said in the interview with the publication’s editor, James Kristie, and chairman, Robert Rock.

Dow outbid BASF with a $78 per share offer that was announced nearly a month later. Rohm & Haas shares were trading at $55. Then, the global economic slowdown walloped the chemical industry. By year’s end, that price looked too rich. Dow wanted out, but Rohm & Haas sought to force Dow to complete the deal.

After some legal jousting, the $15.3 billion deal closed on April 1. “Clearly it was a home run for the shareholders. From the point of view of the employees it’s obviously been painful,” Gupta said.

By that, he means the layoffs and plant closings announced by Dow, including its factory in Philadelphia’s Bridesburg section, where the last 25 employees will lose their jobs by mid-2010.

But in the interview, he makes it clear that cuts would have been inevitable - deal or no deal.

“Given the economic environment we were facing, we would have had to go through a major downsizing and restructuring on our own at Rohm & Haas,” he said.

Earnings

Tuesday: DuPont, Pfizer;

Wednesday: Air Products & Chemicals, Boeing, Exelon, SEI Investments;

Thursday: Hershey, Merck;

Friday: CSS Industries.
Posted by Mike Armstrong @ 2:05 AM  Permalink | File Under: Manufacturing | 2 comments
Comments   
  • 0 like this / 0 don't   •   Posted 7:43 AM, 10/19/2009
    After years of shrinkage, a weakened DuPont and its lacklustre Management were in no position to take on and successfully integrate a major acquisition of the magnitude of Rohm & Haas. DuPont's total stockholder equity, for example, is only $7 billion as of June 30, 2009. Dow Chemical has grown robustly and is now twice the size of the shrivelled DuPont Company, which was once the largest, most powerful chemical enterprise on the globe! ...funfun..
    — funfundvierzig
  • 0 like this / 0 don't   •   Posted 2:39 PM, 10/19/2009
    One has to ask the question if this buyout, like the actions of others recently on Wall Street, was not motivated first and foremost by personal greed and hubris. Mr Gupta's characterization of a home run for the shareholders and glib reference to the pain for employees losing their jobs is worth some scrutiny. The past 20 years has clearly demonstrated the loss of buying power by the US middle class which any Freshman econ major can tell you is the economic engine needed for social stability and wealth creation. Mr. Gupta has indeed taken a 150+ year old paternalistic manufacturing company which provided a living and career opportunity for thousands spanning two centuries, and turned it into a "home run" for shareholders. That statement needs to be put in context; there were years where his total compensation exceeded 10 million dollars a year and a large portion of that was in the form of restricted stock and options. No one can ever say he did not put shareholders first; he did work tirelessly for the benefit of the short term interests of shareholders over the years. It should not be surprising that Rohm and Haas was cash rich when for the benefit of shareholders other executives, managers and the employees in the plants relative to the top floor were not fairly compensated for their contribution to the organization, nor was there an emphasis on long term investment in research. The problem with a perspective that these activities should be considered a "home run for the the shareholder" is that in 50 years there will be no engine for wealth creation, and the shareholders will be holding worthless pieces of paper in companies that makes products that no one can buy because you haven't supported the other 98% of the population.
    — kgreichard


2 comments
About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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