Dow Chemical agrees to buy rival Rohm & Haas

Dow Chemical Co. has agreed to buy rival Rohm & Haas Co. for more than $15 billion in cash in a deal that Dow hopes will fuel its growth in a more lucrative wing of the chemical-making business.

“The addition of Rohm & Haas’ portfolio is game-changing for Dow,” Chairman and Chief Executive Andrew Liveris said Thursday.

The $78-a-share deal includes money from a Kuwaiti sovereign wealth fund and Warren Buffett’s Berkshire Hathaway Inc. The price represents a 74% premium to Rohm & Haas’ closing share price Wednesday of $44.83. The Haas family, descendants of one of the company’s founders, holds about 65 million shares, a 33% stake worth nearly $5.1 billion based on the purchase price.

The deal is part of an effort by Dow to move into the higher-margin specialty chemicals market, which may provide a buffer against ups and downs in basic chemical sales. Specialty chemicals are for specific uses, compared with those produced as high-volume commodities for manufacturing.

Dow in recent months has announced two sets of wide-ranging price increases in an attempt to offset record costs for energy and raw materials. Rohm & Haas also has increased prices, along with some other of the companies’ competitors. Word of those increases is putting pressure on the shares of chemical makers.

Under Thursday’s deal, Midland, Mich.-based Dow plans to establish an advanced materials business unit at Rohm & Haas’ headquarters in Philadelphia and intends to contribute some Dow businesses to the existing Rohm & Haas portfolio, such as coatings and personal care. The revenue of that new unit is expected to approach $13 billion.

Based on the per-share purchase price and the roughly 196 million shares Rohm & Haas had outstanding as of April 22, the deal is worth about $15.29 billion.

Shares of Rohm & Haas soared $28.79, or 64.2%, on Thursday to $73.62. Dow fell $1.44, or 4.2%, to $32.52.