Dow buys Rohm and Haas for $18.8bn

By Guy Montague-Jones

- Last updated on GMT

Related tags: Dow, Dow chemical company

Dow Chemical has acquired Rohm and Haas in an $18.8bn deal designed to deliver higher margins and stable earnings.

Hailed as a new dawn by Dow, the acquisition will push the company towards specialty chemicals that are better protected from shifting market conditions than basic products. The takeover comes at a time when Dow is under pressure from high oil prices and is having to implement major price hikes to maintain profitability. Because Rohm and Haas is focused on downstream products, including ingredients for personal care, food, packaging and pharmaceuticals, its product portfolio is not so exposed to high oil prices. However, Dow spokesperson Chris Huntley told that the decision to acquire Rohm and Haas was not influenced by escalating oil prices. Aiming at high margins and reliable earnings​ Huntley said Dow's strategy was rather to build its presence further downstream where the firm can differentiate itself from the pack and market products that can not be replicated by competitors. The reward for operating in areas with less cut-throat and price sensitive competition is higher margins and less dramatic shifts in earnings. "The addition of Rohm and Haas'portfolio is game-changing for Dow, enabling us to accelerate the growth of our Performance business portfolio and affording us a strong position in the global specialty chemicals and advanced materials sectors,"​ said Dow's CEO Andrew Liveris. Potential synergies from acquisition​ In addition, Dow and Rohm and Haas have complementary facilities and technologies. Huntley said that in personal care, for example, Dow has a technology to test products in different conditions quickly. By coming under the Dow umbrella, Rohm and Haas will have access to this testing system, enabling it to get products to market faster. Overall Dow expects the takeover to improve its earnings significantly two years after the completion of the deal. It anticipates annual pre-tax cost synergies to be at least $800m. The completion of the acquisition remains subject to the approval of Rohm and Haas shareholders, customary conditions and the approval of the regulatory authorities.

However, the boards of directors of both companies have already approved the deal, under which two Rohm and Hass directors will join the Dow board taking total numbers up to 14. Early 2009 has been earmarked as the target date for the completion of the transaction.

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