...Dow’s Bid for Rohm and Haas 1.Why does Dow want to buy Rohm and Haas? Dow, a producer of low-valued cyclical commodity chemicals, had future aspirations of being not only the largest but as well the highest valued chemical company in the United States. Its strategy was simple: to be an asset-light company with extremely high growth potential fuelled through advanced technology, geographical reach, strong industry channels and an overall switch in to the advanced specialty chemical and materials market. As a result when the option to purchase Rohm and Haas was put to market Dow jumped immediately on the opportunity. Rohm and Haas brought with it mass amounts of experience in the specialty chemical business, strong management and a diverse portfolio of businesses that Dow was searching for. As well it provided an establish foundation within the specialty market in which Dow could further mould to fit within its general corporate structure. In a perfect world, Rohm and Haas was the perfect match for Dow’s two tiered growth strategy, and appeared to be in a vulnerable state with the sudden announcement of its sale. Was the $78 per share bid reasonable? In valuing Rohm and Haas at the time of the bid we believe the price of $78 per share was in fact reasonable. In our calculation of the standalone Rohm and Haas value we used the company’s projected FCF from Exhibit 7a with the provided WACC of 8.5% to complete the DCF. Although the provided calculation...
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...Why does Dow want to buy Rohm and Haas? Was the $78 per share bid reasonable? Why was the deal structured as all cash? Dow Chemical (“Dow”) wants to acquire Rohm and Haas (“Rohm”) for its strong operational and strategic fit. When Liveris became Chairman and CEO of Dow, he shifted the focus to growth and profitability by becoming an asset light producer of commodity chemicals and becoming a high-valued-added producer of specialty chemicals and advanced materials. This combination is a step in that direction that would bring together best-in-class products and technologies, broad geographic reach, and strong industry channels for growth opportunities. Rohm would also expand Dow’s network into emerging markets and alter Dow’s earnings profile by increasing the growth rate and reducing the cyclicality of the chemicals portfolio. The growth synergies driven by expanded product portfolios, innovative technologies, increased geographic reach, and improved market channels were expected to generate $2 - $2.6 billion in additional value. Also, after a one-time restructuring cost of $1.3 billion, Dow expects to generate at least $800 million in annual cost synergies. On a Rohm stand-alone basis, the free cash flow analysis (Exhibit 1) shows that Rohm has an implied per share price of $46.48, which is roughly in line with Rohm’s stock price one day before deal announcement of $44.83. However, when factoring the $11.78 in growth synergies and $34.84 in cost synergies, it yields an implied...
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...Executive Summary In July 2008, Dow Chemical announced an acquisition of Rohm and Haas, a specialty chemicals producer, in an attempt to implement its new strategy of pursuing high growth businesses. The financial crisis that hit in the fall and the termination of PIC joint venture called into question Dow’s ability to finance the deal. Based on the valuation models, paying $78/share for Rohm and Haas remained a good value for Dow post financial crisis as the combined company retained its ability to generate synergies. Dow should proceed with the deal as announced to prevent costly litigations and aim for maximizing long-term shareholder value. To avoid being downgraded to junk status and incurring other concerns of financial distress, Dow should attempt to renegotiate the terms of its financing, particularly its $13 million bridge loan. Table of Contents I. The Firms…………………………………………………...…….p. 3 a. Dow Chemical b. Rohm & Haas c. Petroleum Industries Company II. The Acquisition……………………………………………..……p. 3-5 d. The Rationale e. The Valuation f. The Financing III. The Risks……………………………………………………….…p. 5 IV. The Financial Crisis……………………………………….……...p. 5-7 g. The Macroeconomy and Industry h. The Firms i. The Post-Crisis WACC j. The Post-Crisis Valuation k. The Post-Crisis Financing V. The Recommendations……………………………………………p. 7-8 l. The Options m. The Recommendations ...
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...Dow Chemical’s Acquisition of Rohm & Haas (2008-2009) MGT 4066 Professor Jayaraman December 7, 2010 Joseph Dennis Kunal Parbadia Robert Pirkle Will Weston Yash Ghogre Overview In mid 2008, Dow Chemical found itself in an industry that had recently been experiencing some consolidation. As one of the giants in the chemical material industry, it needed to maintain its position as an industry leader or else it would probably lose its foothold near the top. Then there is the target, Rohm & Haas, a smaller chemical materials firm, yet still considered a rival of Dow Chemical. Both companies had been in operation for a combined 200 years and have been creating innovative materials that each and every one of us see or use in our everyday lives without even noticing. On July 10, 2008, Dow Chemical announced the acquisition of Rohm & Haas, which had been approved by the Rohm & Haas Board of Directors. This deal occurred during one of the toughest economic times in recent history, which eventually had a profound effect on not only the financial structuring, but also the final execution of the deal, as you will see in the pages to come. About Dow Chemical The Dow Chemical Company was founded on May 18th, 1897 when Herbert H. Dow established a plan to both manufacture and market bleach and potassium bromide on a factory scale level. In the early years of the company’s existence there was a series of pricing wars between both British and German manufacturers of bleach...
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...52:620:530 D6 (Summer 2015) Arun Kumaraswamy Case preparation questions KTM – Ready to race (for general discussion in class) 1. Size up KTM (its strategy, resources/capabilities, organization and management) and its environment. How is it performing? 2. What growth options does it have? How does each growth option fit with its environment, strategy/resources/capabilities? How well can KTM deliver on each of these options? 3. What growth options should KTM pursue? Should it pursue organic growth (i.e., through internal development), merge/acquire (if yes, who) or use alliances? Newell Co: Corporate strategy (for general discussion in class) 1. Is Newell’s corporate strategy successful? Does the company add value to the businesses within its portfolio? 2. What are Newell’s distinctive resources and competencies? 3. What challenges does Newell face in the late 1990s? 4. Given this context, does the Calphalon acquisition make sense? Rubbermaid acquisition? Why (or why not)? Antitrust regulation in a global setting: The EU investigation of GE/Honeywell merger (for general discussion in class) 1. What markets are affected by the proposed GE/Honeywell merger? Who are the main competitors in these markets and how are these markets related to each other? 2. What would the combined market share of GE and Honeywell be in each of the markets you identified in Q1? How would these estimates change depending on how broad or narrowly you define these markets? 3. Which...
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...THE INTELLIGENT INVESTOR A BOOK OF PRACTICAL COUNSEL REVISED EDITION B E NJAM I N G RAHAM Updated with New Commentary by Jason Zweig To E.M.G. Through chances various, through all vicissitudes, we make our way. . . . Aeneid Contents Epigraph iii Preface to the Fourth Edition, by Warren E. Buffett viii A Note About Benjamin Graham, by Jason Zweig x Introduction: What This Book Expects to Accomplish COMMENTARY ON THE INTRODUCTION 1. 1 12 35 The Investor and Inflation 47 COMMENTARY ON CHAPTER 2 3. 18 COMMENTARY ON CHAPTER 1 2. Investment versus Speculation: Results to Be Expected by the Intelligent Investor 58 65 COMMENTARY ON CHAPTER 3 4. A Century of Stock-Market History: The Level of Stock Prices in Early 1972 80 General Portfolio Policy: The Defensive Investor 88 COMMENTARY ON CHAPTER 4 5. 101 124 Portfolio Policy for the Enterprising Investor: Negative Approach 133 COMMENTARY ON CHAPTER 6 7. 112 COMMENTARY ON CHAPTER 5 6. The Defensive Investor and Common Stocks 145 iv 155 COMMENTARY ON CHAPTER 7 8. Portfolio Policy for the Enterprising Investor: The Positive Side 179 The Investor and Market Fluctuations 188 v Contents COMMENTARY ON CHAPTER 8 9. Investing in Investment Funds COMMENTARY ON CHAPTER 9 213 226 242 10. The Investor and His Advisers 257 COMMENTARY ON CHAPTER 10 272 11. Security...
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