This case looks at Dow Chemical Company's offered takeover of Rohm and Haas in the year 2008. The $18.8 billion purchase was a step in Dow's transitional plan, going from a low-development, low profy and cyclical manufacturer of fundamental chemicals into becoming a higher-development, increased profit anda more steady manufacturer of performance solutions and drugs. At the same time, Dow had contracted a partnership with Petrochemical Industries Company (PIC) of Kuwait, an agreement that would lead to a revenue of $7 billion cash which would then be used to fund the complete cash proposal to purchase Rohm and Haas. Dow and Rohm announced the businessmerging of Rohm on July 10, 2008, just prior to the financial meltdown in September 2008. The emphasis of the case is on the activities that took place after the financial depression grew to become an international economic crisis. Dow, like all other players in the industry underwent a loss as the international economy plunged into depression during the latter half of 2008, and as the financial markets and activities came to a standstill. To worsen the situation, PIC put an end to the partnership agreement with Dow in December 2008. Consequently, Dow suffered in three prime ways: first, it failed to capture a significant financing avenue for the offered takeover; second, Dow’s own pecuniary standing and internal cash flow streams went down suddenly (its share price value fell by more than 70% in 2008) and third, Rohm's predicted sales, income, and value depreciatedrapidlywhich lowered its lucrative standing as an asset to be purchased. With this turn of events, Dow indicted to put an end to the agreement to merge with Rohm in January 2009. Rohm reacted strongly with its own persecution, claiming that Dow be compelled to go ahead with the initial deal and agreement. In February 2009, Dow’s BoD and CEO, Andrew Liver is to determine foremostly about how to handle the Rohm purchase case and the lined up indictments, and secondly, also about the company’s deteriorating financial performance and the PIC partnership.
Total Free Cash flow
Considering Terminal Value
Present value of free cash inflows
Why does Dow want to buy Rohm and Haas? Was the $78 per share bid reasonable?
What are the major deal risks inherent in the merger transaction? How and to whom does the merger agreement allocate these key risks? Hint: analyze the various provisions in case Exhibit 4. What risk does each provision address and which party ultimately bears the risk?
As of early February 2009, what should Andrew Liveris (Dow’s CEO) do and what should Raj Gupta (Rohm and Haas’ CEO) do?
If you were the judge (Hon. William B. Chandler III) in the Delaware Court of Chan-cery, how would you resolve this legal dispute?