Dow’s Bid for Rohm and Haas

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Dow’s Bid for Rohm and Haas 1.Why does Dow want to buy Rohm and Haas? Dow, a producer of low-valued cyclical commodity chemicals, had future aspirations of being not only the largest but as well the highest valued chemical company in the United States. Its strategy was simple: to be an asset-light company with extremely high growth potential fuelled through advanced technology, geographical reach, strong industry channels and an overall switch in to the advanced specialty chemical and materials market. As a result when the option to purchase Rohm and Haas was put to market Dow jumped immediately on the opportunity. Rohm and Haas brought with it mass amounts of experience in the specialty chemical business, strong…show more content…
But Termination Fees §7.2a protects both parties from breaching the contract by the other party. II. Risk of Solicitation Contractual Terms included: §5.3 No solicitation, §8.10 Third-Party Beneficiaries As a attractive acquisition target, there are other buyers who are interested in Rohm. Therefore, Dow faces the risk of other bidders who make better offers. §5.3 No solicitation limits Rohm not to solicit other parties to competitive bid, therefore reduces Dow’s risk. Also, §8.10 protects both parties by prohibiting any other person benefit from the merger. III. Risk from Financial Side Contractual Term included: § 3.17 Fairness Opinion The fairness of the valuation of Rohm is important to both Rohm’s and Dow’s shareholders. The financial evaluation is provided by Goldman Sachs & Co, so Goldman Sachs & Co will be responsible for any mispricing effect. IV. Risks of unpredictable circumstances Contractual Term Included: § 3.1 Material Adverse Effect (MAE clause) The MAE clause protects buyer’s interests by allowing the buyer to terminate the deal under special circumstances and changes that had a material adverse effect on the target company’s business. However, it is extremely hard to define whether an event is under MAE or not. So in real world, MAE clause does not necessarily protect buyer’s benefits. In this case, the MAE actually favors Rohm since the financial crisis affected the whole chemical industry and financial
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