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Dow reaches agreement to close Rohm and Haas acquisition

17 March 2009

The Dow Chemical Company has reached agreements with Rohm and Haas and certain of its shareholders, that permit Dow to close the acquisition on substantially altered financial terms by April 1, 2009. The agreement resolves the litigation initiated by Rohm and Haas against Dow on January 26, 2009.

Dow reaches agreement to close Rohm and Haas acquisition
Dow reaches agreement to close Rohm and Haas acquisition

The acquisition creates the world's leading specialty chemicals and advanced materials company, combining the two organisations' best-in-class technologies, broad geographic reach and strong industry channels to create an outstanding business portfolio with significant long-term growth opportunities.
"Dow has taken the time and steps necessary to close this transaction on substantially improved financial terms to the company, despite the continuing financial and economic uncertainty facing our world. The strategic benefits of the acquisition of Rohm and Haas have never been in question; just the path to completing the deal," said Dow Chairman and CEO, Andrew Liveris.

As part of the agreement, Rohm and Haas's two largest shareholders have agreed to purchase $2.5 billion in face value of perpetual preferred equity issued by Dow. In addition, one of the shareholders, the Haas Family Trusts has agreed that at Dow's option, they will make an investment in an additional $500 million of Dow's equity. These equity investments substantially reduce the debt financing required to fund the acquisition, Dow has restructured the transaction to essentially pay the equivalent of $63 per share in cash, and $15 per share in face value of preferred equity securities. To fund the acquisition of Rohm and Haas, Dow will use the proceeds from the equity issuances to reduce the amount it would otherwise be required to draw down from the $12.5 billion bridge loan, which was renegotiated last week to provide a one-year extension on $8 billion of the total loan. The financing for the acquisition also includes equity investments of $3 billion by Berkshire Hathaway and $1 billion by the Kuwait Investment Authority (KIA) in the form of convertible preferred equity.

Dow plans to achieve its long-term goals for the Rohm and Haas acquisition with a carefully conceived path forward built upon the cornerstones of financial discipline and operational excellence. Dow has put into place an even more aggressive plan to realise combined synergies of $1.3 billion, up from $910 million, as originally outlined. With a long history of operational excellence, Dow has a demonstrated willingness to make the decisions necessary to maintain and improve financial performance. Cost savings will come from increased purchasing power for raw materials for the combined company; manufacturing and supply chain work process improvements; office consolidations and the elimination of redundant corporate overhead for shared services and governance.

Finally, as part of the Company's plans to improve its financial position, Dow has commenced an aggressive asset divestment program involving a number of Dow and Rohm and Haas business units expected to yield approximately $4 billion including: Dow's 45% stake in Total Raffinaderij Nederland NV (TRN), the Dutch petroleum refining partnership with Total Group. The sale process is underway; some of Dow's equity stakes in its olefins and derivatives business in SE Asia. Preliminary discussions with the relevant parties have already begun; and Morton Salt, a division of Rohm and Haas, contingent upon the closing of the proposed acquisition of Rohm and Haas by Dow. Interested parties have submitted bids, and Dow will evaluate these bids as appropriate over the course of the coming weeks to determine timing of the sale process.

Divestments from this program, in addition to the increased equity financing will essentially address the cash shortfall created by the failure of the K-Dow transaction to close as scheduled.

"Rohm and Haas is a strong operational and strategic fit for Dow and is a critical component of the Company's long-term transformational strategy. This combination brings together the two companies' best-in-class products and technologies, broad geographic reach, and well-developed channels to market. As a combined entity, we will form a world-class platform with significant long-term growth potential, said Liveris. Additionally, we are a strong company with a history of strong operating performance and a passionate commitment to our shareholders."

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