Dow buying Phila.’s Rohm & Haas for $15B

Rohm & Haas Co., one of Philadelphia's oldest publicly traded companies and a major employer in the region, has reached an agreement to be acquired by chemical giant Dow Chemical Co. in a $15 billion transaction, including debt, that will be highly lucrative to shareholders.

The $78-a-share deal was announced this morning. The stock closed yesterday at $44.83, and closed today at $73.62.

The agreement provides that Rohm and Haas will retain its Philadelphia headquarters location, and continue to do business under the Rohm and Haas name, according to a Rohm & Haas statement.

Dow's financing for the deal will come from several sources, including Warren Buffett's Berkshire Hathaway and the Kuwait Investment Authority. Other debt financing comes from Citigroup, Merrill Lynch and Morgan Stanley, Dow said.

Rohm & Haas, whose major business is making additives for house paint, said today that if the deal is approved by shareholders it will retain its Philadelphia headquarters, which are at Independence Mall, and strengthen its business with Dow.

Rohm & Haas employs about 3,100 people in the region: In addition to its headquarters, it has a site in Bristol in Bucks County; a research center in Springhouse, Montgomery County; and a manufacturing plant in Delaware.

Rohm & Haas has about 15,000 employees around the world.

"I have relentlessly talked to our employees, customers and stockholders about the imperative to seek opportunities for transformative change. In its 100-year history, Rohm and Haas has constantly reinvented itself, and this agreement offers outstanding potential to do the same yet again," company chief executive officer Raj Gupta said in the announcement this morning.

Gupta and and executive Pierre Brondeau, who was recently promoted to president and chief operating officer, said today that they did not see major employee cutbacks and that the Rohm & Haas brand and local operations would remain intact.

Rohm and Haas shares on the New York Stock Exchange soared more than 65 percent by midmorning, and finished the trading day at $73.62, up $28.79 (64.22 percent).

Dow Chemical shares fell 1.41 percent, or 48 cents, to $33.48 by midmorning and finished the day at $32.52, down $1.44 (4.24 percent).

Rohm & Haas said the family trusts that control about 33 percent of the company's voting stock have approved the deal.

Gupta said today that members of the Haas family approached him last fall and said they wanted to sell their company shares, indicating that they'd been told by financial advisors to diversify their holdings.

He strove to maintain the company's independence by buying those shares - from trusts - at market prices over several years, but soon had offers from other companies.

Gupta insisted that the weak economy and soaring raw material prices forced the company into Dow's hands - although he said that operating inside Dow will give the company access to raw materials that Dow manufacturers.

On behalf of the entire Haas family, John C. Haas, 90, expressed unwavering fidelity to Rohm and Haas and its leadership, employees and future.

"I learned many years ago that there is no substitute for surrounding yourself with wise and honest colleagues, and then trusting their wisdom and judgment," Haas said. "We are particularly proud the company name and Philadelphia location were deemed essential to the merits of this transaction. The value and opportunities this transaction will create for all the company's constituencies are a tribute to a great company, with dedicated employees and sound leadership over many years."

Its major business is manufacturing additives for house paint. The company also has a major salt-mining division and an electronic materials unit that manufacturers chemicals and other materials for computer-chip manufacturing and flat-top panel displays.

Rohm & Haas recently announced it would eliminate 925 jobs in North America because of a downturn in the U.S. paint business. The company has been expanding rapidly overseas.

The deal comes amid a far-reaching plan, developed by Gupta and his executives, to transform the company by 2010 into a more profitable enterprise.

Rohm & Haas and Dow are both confronted with rapidly rising raw material costs, and Rohm & Haas indicated that the merger was at least partially related to those cost pressures.

Dow, of Michigan, will contribute product lines to Rohm & Haas that will allow it to grow its annual revenue to about $13 billion, Rohm & Haas said.

"After an extensive analysis of acquisition opportunities in the marketplace, it became clear that Rohm and Haas is the ideal company to accelerate Dow's transformation," Andrew N. Liveris, Dow chairman and chief executive officer, said in a statement.

"The addition of Rohm and Haas' portfolio is game-changing for Dow, enabling us to accelerate the growth of our performance business portfolio and affording us a strong position in the global specialty chemicals and advanced materials sectors. Rohm and Haas brings us access to new and exciting technologies and offers an extended reach into emerging geographies, all of which are highly complementary to Dow's existing platforms and value growth priorities.

Employees arriving for this this morning at the Independence Mall headquarters either said they were unable to comment or shook their head no as they looked down at the ground and walked inside. One employee did say that she was "shocked."

Another employee said, before rushing into the building: "It was a surprise, but I'm sure it will be for the better."