Dow could seek reduction in initially agreed US$15.3 bln valuation of Rohm & Haas

Kuwaiti government has scrapped Dow Petrochemicals US$17.4 bln JV with Kuwait's Petrochemical Industries Co. Kuwait has termed the JV as, "very risky" due to the global financial crisis and crude prices that have tumbled more than 70% since July. The pack up of this V could have an effect on Dow Chemical's proposed acquisition of Rohm & Haas. Dow may be less willing to pay the initially agreed US$15.3 bln price for Rohm & Haas - an amount agreed upon last summer when energy prices peaked. Dow initially agreed to pay US$78/share, a huge premium over Rohm & Haas' US$44.83 closing price on July 9. Dow had agreed to pay a 74% premium for Rohm & Haas in July as all chemical makers were faced with unprecedented costs for energy and carbon-based feedstocks. Some analysts believe it would be unrealistic to expect the original price to hold. But Dow's balance sheet could be leveraged by US$29.6 bln if the Rohm & Haas deal is not reworked, possibly jeopardizing Dow's investment-grade rating. Dow has issued a quarterly dividend for nearly a century; and if it takes on that much debt, it could threaten the dividend.
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