Clearing an antitrust hurdle is usually good news for a company with a pending acquisition. But Dow Chemical Co. might be excused for having mixed feelings about the European Commission's
decision to approve its $18 billion purchase of Rohm and Haas Co.
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With the approval, Dow and Rohm only need backing from the U.S. Federal Trade Commission to close the deal, with that determination expected any day now. If the merger is not completed by Jan. 10, Dow will be forced to pay a "ticking fee" of $100 million per month to compensate Rohm shareholders for any delay.
But a lot has changed for Dow since the Rohm deal was announced, including most notably a Kuwaiti partner's
last-minute decision to back out of a joint venture with the company's plastics' unit. Dow had hoped to use at least $7 billion from that joint venture to pay for the Rohm deal, leaving it scrambling for cash as the deadline approaches.
Dow is now trying to juggle a desire not to overleverage its balance sheet with a tight merger agreement that appears to give Rohm considerable leeway to sue should the acquirer back out.
Which is where regulators could help out. Should the deal not win antitrust approval, Dow according to the agreement could walk away simply by paying a $750 million breakup fee. With the European ruling on Thursday, one chance Dow had as a lifeline has disappeared.
Analysts do not expect the FTC to stand in the way either, and for the record Dow has given no indication that it would like to walk away from Rohm. But the company, already short on options, lost one on Thursday. And that hardly seems cause for celebration. -
Lou Whiteman
See Dow's releaseSee TheDeal.com story on Dow's troubles with Kuwait
