Dow Shareholders Still Feeling the Pain

The good news is that Dow Chemical was finally able to renegotiate its Rohm & Haas purchase. The bad news is that Dow still has to pay $78 per share to finance the purchase but did get Rohm & Haas’ two biggest shareholders to invest 3 billion dollars in Dow.

Dow’s two biggest shareholders will receive 2.5 billion in preferred stock and invest another $500 million in the company. Investors were obviously not impressed as Dow’s stock was driven down to $5.87 in after hours trading. Dow still has to sell off assets, issue more debt and cut jobs just to complete the Rohm & Haas deal by April 1st. Analysts estimate that 20 cents per share of Dow’s earnings will be used to pay off interest payments on the newly issued preferred stock alone.

The only winner in the newly reached agreement are Rohm & Haas shareholders. Dow shareholders will still be feeling the pain for years to come.

Comments

[CLIFECYCLE:]

WHAT THE HELL...at 6 bucks a share and an 8% dividend? I got time.

Mar 10 07:16 AM

[UserThunder...:]

Dow will eventually be extremely happy they purchased Rohm & Haas. Kudos to Paulson & Co., Hotchkiss & Wiley, & the Haas Family for putting the interests of their shareholders front and center. Let this experience be a lesson to all those in the arbitrage space. Never believe any of the "spin" surrounding merger deals: As my grandad used to say--Don't believe anything you are 'told', and only half of what you 'see.' While these comments aren't to be taken literally, there is a kernel of truth here.

Mar 10 12:23 PM

[jculley:]

I expect they will have to eliminate the dividend all together, given the massive debt load.

The only problem with Dow being happy with ROH is that they completely ruined the common shares. The company may not go bankrupt but this is some very, very expensive debt. It will cripple earnings for many years and has made DOW investments dead money.

Mar 10 11:14 PM