Rohm & Haas Sues Dow Chemical In Delaware Court
January 26 2009 - 1:11PM
Dow Jones News
Rohm & Haas Co. (ROH) has filed a lawsuit against Dow
Chemical Co. (DOW) in an attempt to force Dow to close its $15.3
billion merger agreement.
The suit, filed Monday in Delaware court, alleges Dow is
intentionally breaching its obligation to complete the deal even
though it has received all regulatory approvals and has the money
available.
Earlier Monday, Dow confirmed that it doesn't intend to close
the merger by a Tuesday deadline, with Chief Executive Andrew
Liveris calling the deal "untenable at this time" in a prepared
statement.
Under the agreement, Dow had two business days to complete the
deal after receiving final regulatory approval, which came
Friday.
The Rohm & Haas lawsuit alleges the agreement
"unambiguously" requires Dow to close by Tuesday. It seeks "a
decree of specific performance requiring Dow to close the merger
agreement immediately."
In its announcement Monday, Dow Chemical blamed "unacceptable
uncertainties on the funding and economics of the combined
enterprise" for the decision to put off the deal. Factors cited by
Dow include a slump in chemicals demand that started in the fall,
as well as last month's implosion of Dow's planned $17.4 billion
joint venture with Kuwait.
Dow had been slated to reap $9 billion from the Kuwait joint
venture, known as K-Dow, and it intended to put the money toward
the Rohm & Haas purchase.
But Rohm & Haas contends the merger, agreed upon in July,
wasn't contingent on Dow's joint venture with Kuwait or on any
specific financing agreements.
"The failure of the K-Dow venture does not provide Dow with a
basis for refusing to close," the Rohm & Haas complaint
notes.
It cites a $13 billion one-year loan commitment that Dow
received from a group of banks in September, as well as $4 billion
in extra financing from Berkshire Hathaway Inc. (BRKA BRKB) and the
Kuwait Investment Authority.
"Together, these debt and preferred equity financing commitments
total $17 billion - $2 billion more than the total transaction
price of approximately $15 billion," the complaint notes.
Meanwhile, Rohm & Haas contends in the suit that Dow engaged
in "surreptitious, wrongful and deliberate efforts" to delay
antitrust clearance of the merger.
It also contends that Liveris met with Rohm & Haas
executives last week and asked for an extension until June 30 to
close the deal. But Liveris "refused" to commit to going through
with it even if Rohm & Haas granted the extension, the suit
contends.
Rohm & Haas shares were off 15.7% recently, or $10.32, at
$55.50. Dow shares were off 3.7%, or 53 cents, at $13.80.
-By Bob Sechler; Dow Jones Newswires; 512-236-9637
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.