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Pulling off mega deals is always tough. But in the case of Dow Chemical's (NYSE: DOW) acquisition of Rohm & Haas Co., the process was a rollercoaster. Struck before the financial system went into cardiac arrest last year, the transaction resulted in a lawsuit. The main reason was the implosion of Dow's joint venture with a Kuwaiti state-owned company.
Yet, Dow was able to resolve things, albeit with a complex arrangement. The new strategy involved preferred shares, new short-term financings and sales of various divisions, such as the unloading of the Morton Salt unit.
For Dow's CEO, Andrew Liveris, it was a masterful performance and shows the importance of leadership as during this time the chemicals business was plunging. Keep in mind that there was little hope of a solution, as Dow's shares fell to $7 in early March. They were at $32.52 when the company agreed to buy Rohm & Haas.
This does not to imply everything is fine. Let's face it, the recession continues to take a toll. In Dow's latest quarterly report, the company posted a 31% drop in revenues to $11.3 billion. There was also a loss of $344 million, or $0.47 per share, which compares to a profit of $762 million, or $0.81 per share in the same year ago. Dow had to take a $622 million restructuring charge.
Interestingly enough, Liveris believes the U.S. economy has reached a bottom. However, as seems to be the consensus, the recovery is likely to be sluggish.
But investors are encouraged. In today's trading, the shares of Dow were up about 8.5% half an hour after the open.
Tom Taulli is the author of various books, including The Complete M&A Handbook,
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