The New Bankers

Besides the 74% premium of the proposed deal, this morning's announcement of Dow Chemical's (DOW) buyout of Rohm and Haas (ROH) for $78 per share in cash had another noteworthy aspect to it concerning the funding of the deal.  In the third paragraph of the press release, DOW says:

Financing for the acquisition includes an equity investment by Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred securities for $3 billion and $1 billion respectively.  Debt financing has been committed by Citi, Merrill Lynch and Morgan Stanley who acted as financial advisors on the transaction.

Since when have the government of Kuwait and Berkshire Hathaway (BRK.A)(BRK.B) become bankers for M&A deals?  While this is the first transaction we have seen where the Kuwait Investment Authority has helped finance a major merger, it is the second deal in recent months where Berkshire Hathaway has been involved.  With the brokerage firms so strapped for cash, we wonder at what point companies in need of financing will bypass them altogether.

 

Comments

[Cesar Valencia:]

Buffet financed Salomon Brothers in the 80's. He knows how to turn "loans" into investments.

2008 Jul 10 03:41 PM

[mkreisel:]

BRK has done these "Convertible Preferred" deals ever since GEICO's 1978 secondary offering.

It later got more sweet convertible deals from Capital Cities, American Express, and Gillette.

2008 Jul 11 03:48 AM