Buffet helps Dow Chemical snap up rival
America’s Dow Chemical agreed to buy rival Rohm and Haas for $18.8bn (£9.4bn) in cash yesterday in a deal designed to boost sales in the higher margin specialty chemicals market.
Dow will pay $78 in cash for each Rohm & Haas share, a 74 per cent premium to Wednesday’s closing price of $44.83 the day before the deal was announced.
The purchase is in part financed by Warren Buffett’s Berkshire Hathaway investment group, which put in $3bn, and by the Kuwait Investment Authority, which put in $1bn.
Berkshire Hathaway will become Dow’s biggest shareholder. The Haas family, descendants of one of the firm’s founders, hold a 33 per cent stake in Rohm & Haas, worth $5.1bn based on this purchase price.
Dow chairman and chief executive Andrew Liveris said: “The addition of the Rohm and Haas portfolio is game changing for Dow. There aren’t many jewels out there, this is one of them.”
Oppenheimer & Co chemicals analyst Edward Yang said: “We believe Dow is paying a very high price. This should provide a momentary valuation lift to the chemicals group, but we are hesitant to predict similar strategic deals at similar multiples.”
The acquisition is part of an effort by Dow to move into the higher-margin specialty chemicals market, which may provide a buffer against ups and downs in basic chemical sales. Specialty chemicals are produced for more specific uses, compared with those produced as high-volume commodities for manufacturing.
Rohm and Haas, which employs 15,000 workers and made sales of $8.9bn last year, makes products ranging from acrylic additives and binders that go into paint, enabling it to be smooth and lets it stick to the wall, to chemical coatings that go onto flat panel displays for brighter television screens.
Dow said the deal will make it the world’s leading specialty chemicals and advanced materials company.