Spoke Friday with sources who have insight into the litigation between Dow Chemical (DOW) and Rohm & Hass (ROH). Some notes
– Delaware courts are “courts of equity”. Simply put, the Judge has a broad array of remedies short of forcing a merger. He could rule for or against “specific performance” and either force the merger or not and then decide on damages. Should he rule against Dow, they would have the option of an appeal.
– He also has the option to order specific performance but at a later date.
– The Judge did seem to recognize and agree that specific performance was a remedy of equity and that because he is in a court of equity, he won’t simply ignore certain realities outside of the contract.
– Dow is trying to impress on the court that those at Rohm & Haas who are fighting to close now, have no interest in the health or outcome of the company after the merger and that the well-being of the near 60,000 employees should be taken into account by the court.
For instance, the family of company founder Otto Haas, would receive $5 billion, Raj Gupta, the chief executive officer of Rohm & Haas would receive over $100 million and Paulson & Co. Inc., second-largest holder of Rohm & Haas stock, the value would be $1.5 billion. In short 3 groups receive nearly 50% of the proceeds of the sale.
Recently, David Bernick, an attorney for Dow, said the Haas family and other shareholders cared only about the huge payout, even more than the future of the company and its employees. “The Haas family apparently has no interest in the health of Rohm & Haas,” he said last week.
This is illustrated by the unwillingness of management to work with Dow at all on the closing date. What happens to the combined entity after the closing is of no interest to management.
– Paulson’s letter was self indulgent and old news. Dow has already considered (and publicly said so) and investigated the remedies he put forth in the letter. His offer to put money into an offering was gratuitous.
Separately, I was informed later in the day Friday (from other sources) that:
– Dow is in very active conversations with parties regarding the commodity business. The source said they believe that the primary party was Sabic or the Saudi Basic Industries Corp. You’ll remember they were the buyer for GE’s(GE) plastic business
More on this as I get more information..
Disclosure (“none” means no position):Long DOW
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