Todd Sullivan's - ValuePlays

Rohm and Haas (R&H) approached Dow Chemical and two other companies in early June to gauge their interest in acquiring R&H, a move that resulted in Dow’s July 10 acquisition agreement, says a recent R&H SEC filing. The surprise move late last year by the Haas family trusts, which control 32% of R&H shares, to seek the sale of its stake was the driver behind the R&H sale. Dow’s $18.8-billion, or $78/share, bid bested a $75/share offer from another chemical maker identified in the filing only as “company A.” BASF told CW last month that it placed a bid but declined to reveal the amount of its offer (CW, July 7/14, p. 7).

Haas trusts representatives told R&H chairman and CEO Raj Gupta in November 2007 that the trusts would seek to sell “all or substantially all” of their holdings within 12-18 months, the filing says. “Based on the trusts’ prior conduct, the company’s board of directors did not anticipate the request of the Haas trusts,” the filing says.

R&H and its financial adviser Goldman Sachs (New York) discussed several steps during the next six months to address the sale or purchase of the trusts’ holdings as well as other possible alternatives including putting R&H up for sale, the filings say. The group held discussions in April and May regarding R&H repurchasing a small percentage of the trusts’ shares as part of a deal that called for the trusts’ remaining holdings to be sold over a three-year period, R&H says.

R&H’s management maintained a strong desire to remain independent through negotiations, but management and the board were concerned about market and industry reaction to a sale by the trusts, the filings say. In early June, Gupta held separate discussions with Dow chairman and CEO Andrew Liveris as well as the CEO of company A, believed to be BASF, regarding their interest in R&H, the filings say. Gupta subsequently had a similar conversation with the third company’s CEO, it adds.

Dow responded with an initial offer of $74/share on June 16, which prompted R&H to conduct a “targeted process” among Dow and the two other potential acquirers, the filings say. Company A responded with an offer of $70/share. R&H requested definitive acquisition proposals, which resulted in a $76/share bid from Dow, and a $75/share bid from company A. R&H once again contacted the two companies seeking higher bids.

Dow submitted a $78/share bid on July 9, and company A submitted a revised agreement that improved certain terms but did not increase its offer, R&H says. Dow and R&H signed a definitive agreement that included a voting agreement with the Haas trusts.