Crocodilian

Will Rohm & Haas Beat Dow in Court? Not So Fast

Dow made a deal. It turned out to be a bad deal. If every deal which was bad for one party or the other was reneged upon-- how many deals would be struck? Why strike a deal if it may be reneged upon later?

I was a Dow shareholder, so it hurts, but failure to close this would be a disaster.

Courts are not here to judge the macroeconomic consequences of mergers, beyond anti-trust.

Dow's only out will be financing. If their financiers renege, that may give them an out.

Some Thoughts on Dow Placing Dividend Cut on the Table

I sold Dow. Owned it for the dividend, but the dividend is going to be cut.

In the legal game of chicken that Dow is playing, they're following the Hexion's line, which is to say that if the proposed merger were to go through, the combined entity would be insolvent; a judge bought that line with Hexion-Huntsman

But here's the thing: the judge will have zero patience for a company paying a discretionary $1.5 billion dividend, which then claims its short of money to perform on a contractual obligation, it just fails the "smell test".

Dow has no contractual obligation to pay a dividend,and it does have a contractual obligation to buy Rohm and Haas. Sucks for Dow shareholders, but it is what it is.

Once they've made the cut, their argument "we'd be insolvent if we closed the deal" will have more weight. . . thus cutting the dividend is a signal to Rohm Board that Dow is getting ready to fight, and is more likely to get them to negotiate on terms.

Also up in the air is whether the negotiated bridge financing gets pulled-- clearly Dow would like Buffett to say "things have changed, we won't do the bridge)

My guess is that the deal closes, but for less than $78