Back in July, Dow Chemical Co. (NYSE: DOW) agreed to pay $15.4 billion for Rohm & Haas Co. (NYSE: ROH), a top specialty chemicals operator. At the time, it looked like a sign that confidence was coming back into the system.
But, of course, the smart money was proved wrong – once again -- as the deal fell apart. So, this week Rohm & Haas has filed a suit against Dow to force the deal to happen. You see, the deal was supposed to close Monday.
The legal action rattled investors: On Monday, Dow's stock fell 7.61% to $13.24 and Rohm & Haas' stock was down 13.25% to $57.10.
Oh, and with the slowdown in the global economy, the chemicals industry is plunging at an alarming rate. In fact, a variety of companies in the sector have filed for bankruptcy.
However, the fact remains that Rohm & Haas negotiated a solid contract. Simply put, Dow has no right to undue the deal because of problems with financing. All in all, this is going to make for an interesting court case.
For investors, though, things are dicey. As seen so far, the overhang of uncertainty often means lots of volatility. Thus, for long-term investors, it's probably best to stay on the sidelines.
Tom Taulli is the author of various books, including The Complete M&A Handbook
Nuclear power is on the comeback trail
Apple backs AT&T in continuing spat with Verizon
Closing Bell: The recession is still over, still... do you feel it?
Reader Comments (Page 1 of 1)
1-27-2009 @ 1:37PM
Kent said...
This event is in stark contrast to the successful conclusion of the buy out of Anhauser Busch by InBev last December. I thought for sure, InBev would be backing out of the deal due to some of the reasons cited by Dow Chemical about available funding. It isn't easy to buy growth these days; probably better to develop growth instead, during times of our economic malaise.