Dow's Bid for Rohm and Haas

Introduction

Herbert Dow founded Dow Chemical Company in 1897, a manufacturer of commercial bleach. In 1900 it expanded into agricultural and food products through a merger with Midland Chemical. From 1983 to 2007 it divested 166 businesses, acquired 95 companies and took stakes in another 58 companies. In 2008, Dow announced to acquire Rohm and Haas as part of the “Dow of Tomorrow” strategy implemented by Dow’s CEO Andrew Leveris.

For more than a century, Dow has strived to create value through its diversified, market-driven portfolio of consumer products. It has developed a reputation for product innovation by developing solutions to meet market needs. At the same time it addresses the challenge of creating long-term sustainable value for the company, its customers and its shareholders.

The combination of Dow and Rohm and Haas was expected to allow Dow to become a high-value-added producer of specialty chemicals and advanced materials. However, short after the deal was announced the global financial crisis hit, leading to the detriment of Dow’s two key deals. First, Kuwait’s Petrochemical Industries Company cancelled the joint venture with Dow and secondly, this cash was necessary to finance the deal with Rohm and Haas.

As a result of these occurrences, Dow refused to acquire Rohm and Haas. Rohm and Haas, however, did not take this lightly and Dow was brought to the Delaware Chancery Court. Dow now faced the challenge of what to do about the acquisition and the lawsuit as well as the PIC joint venture.

1.1 Rationale for Dow to buy Rohm and Haas

In November 2004 Andrew Liveris became chairman and CEO of Dow. He introduced the “Dow of Tomorrow” strategy at an investor conference in March 2006. The strategy included two parts: pursuing an asset-light approach to its low-margin, but cash-rich, commodity businesses while at the same time building high-growth and high-value-added performance businesses. The objective of this strategy was to generate...