Business News

Rohm and Haas Company Provides Statement on Merger with Dow

Wednesday 04. February 2009 - Rohm and Haas Company (NYSE: ROH) today issued the following statement:

We understand that this is a difficult environment for the chemical industry. However, the difficult conditions in the chemical industry and financial markets commenced before Dow agreed to acquire Rohm and Haas and were widely expected to worsen at the time we entered into the transaction. Therefore, we insisted in our merger agreement that Dow assume both of these risks, rather than the Rohm and Haas shareholders. Dow should honor its obligations and close the transaction.

There are multiple steps Dow can and should immediately take to reduce its dependence on the bridge loan and secure the financial strength of the merged company. We are convinced that Dow has the ability to close the deal and succeed.

Yesterday, Rohm and Haas’s Board of Directors sent the following letter to the Dow Board of Directors detailing actions Dow should take to obtain the financing and honor its contract:
 
Letter sent via fax by Rohm and Haas Company

February 2, 2009

 
The Board of Directors
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
 

Ladies and Gentlemen:

The members of our Board of Directors wish to convey to each of you our extreme disappointment at Dow’s failure to honor fundamental and indisputable obligations to our company. Our board selected Dow as the winning bidder based on the contract it signed and on our regard for your company. The behavior we have encountered has confounded us: without claiming any legal justification, Dow refused to close the Rohm and Haas merger as required by the merger agreement between our companies.

We understand that you were disappointed by the K-Dow situation. However, when Dow signed the merger agreement, it did not have a binding deal with Petroleum Industries Company, and neither our merger nor your financing was conditioned in any way on a K-Dow deal. Dow, not Rohm and Haas, took the risk that the K-Dow deal would not close. And Dow, not Rohm and Haas, took the risk that the difficult economic climate that both companies already faced in July 2008 would worsen.

When K-Dow collapsed, the reasonable commercial approach would have been to call and explain that there was a problem and set forth your proposed plan for addressing that problem. We specifically requested that you do this. To this day we have not received a substantive explanation of what Dow is doing to address the impact of the failure of the K-Dow deal. Instead we learned, after the fact, of prohibited ex-parte contacts to regulators made by Dow senior executives and counsel. These activities and Dow’s attempts to claim that they were somehow permitted are not worthy of a great company like Dow.

Nevertheless, we have tried to understand Dow’s difficulties and develop a path to a satisfactory resolution. We therefore asked repeatedly that Dow’s senior executives provide an explanation of Dow’s approach to resolving this situation and completing the merger on the agreed terms. To that end, our Chairman and General Counsel participated in meetings with their Dow counterparts which we hoped would further our evaluation. In order to make those meetings productive, we asked that your top financial executives, as well as our financial and legal advisors, be present in meetings about your proposed financing plan. When that request was denied, we asked that our advisors and financial executives be available nearby – a request that was also denied. In fact, Dow’s executives’ reaction to our desire to bring as much expertise as possible to assist us and them in addressing the current difficulty was to refuse to meet in our executive offices.

When we asked on many occasions for a specific plan, we were told, in different ways, that Dow had many “balls in the air.” When we asked for a specific proposal from Dow concerning the amount of time Dow wanted to delay the closing – a concept we were willing to accept if we could protect our shareholders in the interim – your Chairman instead sent an email indicating, that, if we waited until June 30, Dow would then be better positioned to decide if it would honor its obligation to close. This “offer” constituted the culmination of hours of meetings on three separate occasions.

We urge the directors of Dow to take control of this situation. You are the individual overseers of Dow’s obligation to comply with the merger agreement. If Dow is in the terrible financial condition that your Chairman suggests, we do not know how you could have paid the January 30, 2009 cash dividend of almost $400 million. We certainly do not see how Dow and its directors, consistent with their obligations under the merger agreement and Delaware General Corporation Law § 170, can declare any further dividends at this point.

Dow agreed in the merger agreement to take “all action necessary” to obtain the financing for the merger. This obligation is clear and unambiguous. It is not limited to actions that are on terms commercially favorable to Dow or indeed limited in any other manner. Dow also agreed not to take any action that is reasonably likely to prevent, impair or materially delay Dow’s ability to obtain the financing.

Accordingly, we request that Dow pursue the steps listed on Annex A to this letter in order to obtain the financing for the merger (if financing is not currently available to you) and advise us promptly and frequently of the status thereof.

When we embarked on this transaction, we certainly did not anticipate being a plaintiff in a massive litigation. That is certainly not the Rohm and Haas way. We commenced litigation because from a practical standpoint we were given no viable choice. We await your reply.
 
Sincerely,

Board of Directors

Rohm and Haas Company

 
Signed:
 
 
SANDRA O. MOOSE



Director



 

Annex A

Cease the declaration or payment of any cash dividend, other than a penny per share, and commit to do so in the future to the extent necessary to satisfy lenders and rating agencies.
Actively pursue asset sales of Dow’s and Rohm and Haas’s businesses and divisions. We request that you contact all potentially interested parties, including your competitors, for each and everyone of these diverse businesses. Sales of our assets would, of course, occur at or after the closing of the merger, and we, of course, would fully cooperate with you.
Pursue all options to raise equity in private or public markets, including underwritten and private placements and rights offerings, and all forms of securities, including common stock, warrants and convertible securities.
Pursue all options to raise long term debt in private or public markets, including underwritten and private placements, and all forms of securities, including secured and convertible securities.
Pursue all options to extend the existing $13 billion revolving credit agreement or to seek waivers thereunder or amendments thereto to the extent required.
Take all other actions requested by any rating agency in connection with obtaining financing for the merger.
Evaluate and pursue all available financing options in the event that Dow is unable to retain its investment grade credit rating.
Bear your obligations under the merger agreement in mind when considering and reviewing corporate, capital and discretionary expenditures.

 
cc: John A. Marzulli , Jr.
Scott D. Petepiece
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York l0022