...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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...Synopsis: Dow is acquiring Rohm and Haas from Ingersoll-Rand at an agreed price per share of $78. However, a deal with Kuwait’s Petrochemical Industries Company, which was supposed to generate $7 billion of cash to be used to finance the acquisition, had recently fell-through. The hiccup has led to Rohm taking legal action to force Dow to complete the acquisition as required by the merger agreement. The standalone value of Rohm’s share price is currently at $46.77 while the synergies could almost double that to $94.63 per share. By going ahead with the deal Dow would need to raise capital and that might lead to a lower bond rating. 1. Why does Dow want to buy Rohm and Haas? Dow believes the acquisition of Rohm and Haas would be a defining step in their transformational strategy to shape the “Dow of Tomorrow”. The acquisition of Rohm and Haas would provide a strong fit strategically and operationally for Dow. The combined companies would bring the best-in-class products and technologies, broad geographic reach and strong industry channels to create an outstanding business portfolio with significant growth opportunities. Rohm would provide Dow with an expanded network into emerging markets thereby increasing Dow’s sources of revenues for the future as well as adding a strong and experienced leadership team with a culture of customer focus and innovation. Together the geographic strengths of each company would help realize economies of scale through the combined R&D,...
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...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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...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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...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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...The Museum Experience One of my favorite things to do when traveling in a new city is to visit the museums. I have never been to a city that did not offer the usual museum fare, usually in the form of the “Anytown Art Museum”, or the “Anytown Museum of Natural History”. While these types of museums house some incredible artifacts, and I do visit them often, I also like to seek out museums of a more unusual sort. Museums are mostly the same just about everywhere you go, both in the United States and Europe. They offer the visitor a glimpse into the past culture of any given city or country by displaying relics found throughout the world. But there are also many museums that showcase artifacts of the culture in a much more specific way. Some fine examples of these kinds of museums include the Pez Museum, close to San Francisco, dedicated to the little candy dispenser, the Muzeum hracek in Prague, dedicated to toys of the world, both past and present, the Dungeon, a history of Medieval torture, also in Prague, and the Liberace Museum in Las Vegas, dedicated to all things Liberace--and I mean all things. The Pez Museum is not actually in San Francisco, but is located south of the city in a town called Burlingame. If you are in the Bay Area for any reason, do not miss this museum! Remember when you were a little kid, and you loved to collect Pez dispensers? Well, times have changed, and now Pez collections mean big money, and big business. The most expensive Pez dispenser...
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...Rohm and Haas is a diversified chemicals company. Its industrial chemicals division manufactures maintenance biocide products to the metal working industry. The company enjoys a healthy 30% market share with its Kathon 886 MW in the Central Systems segment. Rohm & Haas has recently launched Kathon MWX to target 150,000 customers in the Individual systems segment where the market for biocides is underdeveloped and has little competition. A large part of the customers use substitute products such as deodorants and bleaches with little effect on microorganisms. The company estimates the market size for the individual segment to be at $20 million and aims to achieve $0.2 Million revenues from this segment in the first year. Despite a superior product, the sales of Kathon MWX reached a meager 6 % of the annual plan in first five months. Rohm and Haas wishes to re-evaluate its strategy in order to tap this huge segment to significantly increase sales volume and market share of Kathon MWX. Rohm and Haas plans to enhance its allocation for distribution and marketing spend of the Kathon MWX. This would result in additional revenue of 0.1 million. This target would be achieved by a combination of a revamped distribution network for Kathon MWX, focused promotion campaign and sampling. Can Rohm and Haas increase its market share ad revenues in the maintenance biocide market with its current product line? The sales of Kathon MWX have barely touched 6% of the annual targeted...
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...case revised May 25, 1993, Rohm and Haas was a leader in chemical technology. One of its four main business segments was Industrial Chemicals, where its strongest product is Kathon 886 MWX capturing 30% of the maintenance biocide market for large systems. Customers who were satisfied with the performance of this product asked for a “convenient, safe-to-use version for their smaller reservoirs” (p4). In December of 1983, Rohm and Haas launched a brand extension called Kathon MWX, designed to kill microorganisms in metalworking fluids for customers with small-capacity tanks. The new product was distributed by large industrial formulators along with the existing Kathon 886 MWX, but sales volume for the product was only 6% of what was expected. Joan Macey, the marketing manager for Rohm and Haas explained the poor sales as low awareness of the brand and its usefulness along with the lack of competition to build demand. The real problem however, was that Kathon MWX was not positioned correctly. Rohm and Haas was an industrial supplier that was trying to sell a consumer product. Because of the pricing scheme, the customer had a very low perception of its value. Furthermore the distribution channel was not appropriate for this type of product. Just because Kathon MWX may have looked good on paper, it didn’t mean the company should have hastily launched the brand. In this situation, more effective leadership would have helped Rohm and Haas avoid such a negative outcome...
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...those issues. The issues facing InterClean highlighted in this analysis are human resource philosophy, employee retention, mergers and acquisitions, human resources product handling and servicing. Benchmarking was conducted to evaluate how other companies had handled situations similar to those of Interclean. Outside companies evaluated for comparison come from the mortgage industry, pharmaceutical industry, oil industry, specialty eatery industry, technology industry, airlines industry, chemical industry, insurance industry, and home improvement retail industry. The companies evaluated in this paper were Guardian First Funding Group, Trinity-Chiesi Pharmaceuticals, BP Amoco, Starbucks, Google, Northwest Airlines and Delta Airlines, Rohm and Haas Company, Liberty Mutual Holding Company, Pepsico, and LOWE’s. Evaluation of these companies showed several concepts used in handling the issues and how the companies used these concepts. Situational Analysis Retaining Employees Guardian First Funding Group - Guardian First Funding Group (GFFG) is a mortgage company exclusively involved in the reverse mortgage business. They have been selling reverse mortgages for a little more than a year now. In this time, GFFG has grown to rank 15th in the industry, with expectations to reach the top 10 by the end of the first quarter, 2009. Comprised mainly of Loan Officers, supplemented by a small number of operations employees, GFFG generates its income through the selling of reverse...
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...Write up for Rahm and Haas (Group 4) Rohm and Haas launched a product Kathon MWX in Dec 1983 for less than 1000 gallon capacity. Sales in first five months for Kathon MWX are $12000. Kathon 886MW and Kathon MWX were sold through a network of formulator/Distributor. Kathon 886MW had a 30%share of $18 million maintenance biocide market for large systems. The issues which we are addressing here are, * Does Kathon MWX like Kathon 886 MW be privately branded by Rohm & Hass? “The company offered private branding on kathon 886 MW but not on Kathon MWX” As quoted by a company manager “… We want the end-user to know it’s a Rohm and Hass Product…” * Formulators included Kathon MWX as part of their maintenance service, though kathon 886 MW was expected to be used by the end-user themselves to do the maintenance work. * Issue with the distribution channel * Does increase in price of the product would change the end perception about the product? * Does not know what the short term and long term sales were appropriate for Kathon MWX? * Is Kathon 886 MW a help or hindrance in developing a market for Kathon MWX? Assumption:- * Expiration period of 6 months. * Selling price of Kathon MWX by Rohm & Hass is $1. Kathon MWX:- Strength * It is more economical compared to competitor products. * Sales force is well educated and would advise consumer in formulation. This product controls bacteria and fungi. It does not...
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...52:620:530 D6 (Summer 2015) Arun Kumaraswamy Case preparation questions KTM – Ready to race (for general discussion in class) 1. Size up KTM (its strategy, resources/capabilities, organization and management) and its environment. How is it performing? 2. What growth options does it have? How does each growth option fit with its environment, strategy/resources/capabilities? How well can KTM deliver on each of these options? 3. What growth options should KTM pursue? Should it pursue organic growth (i.e., through internal development), merge/acquire (if yes, who) or use alliances? Newell Co: Corporate strategy (for general discussion in class) 1. Is Newell’s corporate strategy successful? Does the company add value to the businesses within its portfolio? 2. What are Newell’s distinctive resources and competencies? 3. What challenges does Newell face in the late 1990s? 4. Given this context, does the Calphalon acquisition make sense? Rubbermaid acquisition? Why (or why not)? Antitrust regulation in a global setting: The EU investigation of GE/Honeywell merger (for general discussion in class) 1. What markets are affected by the proposed GE/Honeywell merger? Who are the main competitors in these markets and how are these markets related to each other? 2. What would the combined market share of GE and Honeywell be in each of the markets you identified in Q1? How would these estimates change depending on how broad or narrowly you define these markets? 3. Which...
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...x 2$ = 15.4$ Disposal cost = 50gal x 1.36$ = 68$ Total costs = 15.4 + 68 = 83.4$ Total costs per week = 83.4$ / 7 = 12$ For small shop = 22 x 12$ = 264$/week 2. Why isn't MWX selling? Lack of positioning due to · Difference in perceptions between end users and company. Company see themselves as industrial suppliers while consumers viewed their products as consumer package good · mistakes was the lack of fit between product and company's culture. Rohm and Haas had traditionally been an industrial supplier, distributing products in large quantities. As a result, the culture was not consumer product oriented and employees were not accustomed to designing and marketing a product for consumer use.(page 8) 3. How would you describe the user environment? Who makes the purchase decision? How? 4. What marketing strategy in particular pricing and channel - might possibly work for MWX? · There is no brand awareness for the product therefore would have been much smarter for Rohm and Haas to market it with a name (rebranding) that would suggest something about the product's benefits and quality as well as be easy for... Only in Utopia can you expect to find new products that do not require intensive investments yet promise...
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...Case Review: Rohm and Haas 11/4/2010 Background 2 1983: $2B worldwide sale from 4 segments Kathon microbiocide products: $25M Polymers, resins, and monomers Industrial chemicals Plastics Fluid Process chemicals Specialty chemicals Kathon 886 MW Thayer School of Engineering Agricultural chemicals Petroleum chemicals Kathon MWX 11/4/2010 Background 3 Metalworking fluid: 60 million gallons in the US Biocides kill microorganisms in metalworking fluids Product name Treatment capacity Market potential Sale Volume Actual sale during 1st five month Thayer School of Engineering K 886 MW K MWX 1,000 gal 50-100 gal reservoirs $18M $20M $5.4M (1983) $0.2M (target in 1984) $2.1M $12,000!!! 11/4/2010 Optimistic Prospects for MWX 4 Great market potential ($38M) Maintenance biocides likely to gain market share Several advantages: • Easy to use • No maintenance • Safe • Higher effectiveness • Large customer surplus Thayer School of Engineering 11/4/2010 ... But it doesn‘t sell! 5 Lack of need recognition for biocides Lack of brand awareness among end consumers Lack of MWX awareness Lack of awareness of the benefits of MWX Lack of incentives for distributors to sell MWX Thayer School of Engineering 11/4/2010 End-User EVC of Kathon MWX 6 Compare costs incurred by end-user who does and does not use Kathon MWX Not Using MWX Using MWX Fluid Concentrate Purchase $ $ Fluid Disposal $ $ Risk of Fluid Disposal % % EVC ...
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...MGT 6503 LD & CM SPRING 2013 CAPSTONE CASE- HEWLETT PACKARD Armah Q. Fahnbulleh Wilmington University February 19, 2013 Abstract From the Introduction to Leadership to the Negative (Dark) Side of Leadership and everything thing in between, this has been a life changing seven weeks. My mind was impacted with knowledge that I did not have prior to taking this course. This course has taught me about how to go about bringing change by getting everyone involved especially, the people that are going to be affected by the change. Working with my team members on our Capstone Case, I have learned what it takes to be a team player and a team leader. Listen to all opinions, be very thoughtful and make a sound and decisive decision on which direction to lead your company. Most of all I learned that Leadership and Change are about “PEOPLE.” 1. What have you been assigned to provide in the development of the Capstone Case? Why is it important to the major premise of the Teams initiative? I have been assigned to research company personnel needed to be included in the planning, implementing, sustaining the change and why? A strong leader with a vision, plans, and surrounded by a team of individuals that believe in the vision and trust the leader can effect change. The leader is very important to the major premise of the team initiative because without a leader the team will not have direction. This is like steering a ship without its captain. For our capstone case on Hewlett...
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...Marine Application Guide Bonding and Sealing Organic Windows Application Description Most of the organic glazing materials used in boat building are either clear acrylic sheet (PMMA), widely marketed under trade names such as Perspex and Plexiglas (the latter manufactured by Rohm and Haas), or polycarbonate (PC), marketed by Bayer GmbH as Makrolon and by General Electric as Lexan or scratch-proof Margard. All plastic glazing products possess certain characteristics that must be clearly understood before they are installed or bonded with adhesives. In general, incorrectly installed plastic glazing panels are prone to environmental stress cracking (ESC). This can be aggravated by the use of the wrong adhesives. Sika Transportation_99 Plastic glazing products have a higher coefficient of thermal expansion than conventional glass. Therefore, when designing glazing installations, an expansion gap of at least 10 mm all round the periphery must be incorporated between the window rebate and the plastic glazing panel to accommodate thermal movement. Similarly, any clearance holes for fixing screws must be drilled oversize; slightly larger than the diameter of the screw shank. To minimise the risk of environmental stress cracking, flat sheets of plastic glazing material should be installed completely flat; they should not be forced to take up a curvature by the use of mechanical fastenings. When the design calls for curved glazing panels, these...
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