Rohm and Haas (NYSE: ROH), the U.S. special chemicals company announced that it will change to a new club before its 100th birthday.
On July 11, Dow Chemical (NYSE: DOW) and Rohm and Haas jointly announced a final agreement. According to the agreement, Dow will acquire Rohm and Haas’s outstanding common shares at a cash price of US$18.8 billion (US$78 per share).
On July 14, the reporter recently learned that before the scheduled time for the completion of the merger and acquisition in early 2009, the two companies’ business in Greater China will not be affected for the time being.
The Dow Chemical announced the acquisition of Rohm and Haas news came suddenly. On July 11, some of the managers of both Dow and Rohm and Haas told reporters that they had just been notified.
Rohm and Haas's internal information shows that at the meeting with JP Morgan in June, Jacques Croisetière, Rohm and Haas executive vice president, chief financial officer and chief strategy officer pointed out that the company has encountered a big problem in recent years. - "The rapid rise in the cost of raw materials and energy."
According to Jacques Croisetière, in the five quarters from 2007 to the first quarter of 2008, Rohm and Haas’s cost in this area increased by about US$200 million.
This big issue made Rohm and Haas prepare to cut 925 jobs and cut the emulsion network capacity by 30%. Its net income per share for continuing operations in the second half of fiscal year 2008 is also expected to fall by 0.11 US dollars. At the same time, increasing the price adjustment has also become a last resort for the company.
Therefore, obtaining cost-competitive raw materials has also become one of the important reasons for the final agreement.
In the scenario description after completion of the M&A, Rohm and Haas will not only show that the transaction will bring more value to the shareholders, but also combine with Dow to invest in researching new technology solutions to satisfy many of the most pressing societies. In addition to the need, more emphasis will be placed on gaining a global leadership position in a wider range of specialty chemicals and materials business areas. “We can obtain full integration opportunities through the chemical value chain, so as to obtain a guaranteed and cost-competitive Raw materials."
Raj L. Gupta, chairman and chief executive officer of Rohm and Haas, said: "In the company's 100-year history, Rohm and Haas continued to transform itself. This agreement will provide the foundation for Rohm and Haas's transformation again. â€
Geoffery E.Merszei, Dow's executive vice president and chief financial officer, said that from 2007 to 2012, Dow industrial growth rate was 4%, and Rohm and Haas's original plan was 5%-9%. After the merger of the two companies, the new Dow's goal is 5% -7%.
"After the completion of the merger, Dow expects net income per share from $3.5 to $4 in 2010 and 2011," Geoffery E. Merszei said.
For Rohm and Haas, being merged does not mean that the signboard of this century-old store has entered the dust of history.
The reporter learned that according to the agreement, Rohm and Haas will not relocate its headquarters. Philadelphia remains its headquarters, and the company will continue to conduct business under Rohm and Haas.
Geoffery E.Merszei pointed out that "Rohm and Haas will become Dow's high-tech material business group, and it is expected that future sales revenue will reach around US$13 billion in the future. The group has three business segments: electronic materials, specialty chemicals and Coatings, Dow will add a group of special chemicals business to Rohm and Haas, and form a stronger synergy with the latter. Among them, Dow's high-tech electronic materials business is classified under the name of electronic materials, special packaging Chemicals, polyurethanes, etc. are classified under the category of specialty chemicals, and Dow Coating Solutions is classified as a coating business."
The merger will not have a major impact on the business of the two companies in Greater China.
A person from Rohm and Haas China stated that due to the time required for the completion of the merger, the company has not yet undergone any change and is still in a wait-and-see phase.
Another executive said, "It is too early to discuss the specific impact of this acquisition on each market, but Dow believes this initiative will create new opportunities for Dow's products and technology sales in Greater China. On the operational level, this acquisition transaction is expected to be completed in early 2009 (need to wait for the approval of Rohm and Haas shareholders and relevant regulatory agencies). Prior to this, all Dow's production bases and businesses, including those in China, will Continue normal operations."
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