Dows Bid For Rohm And Haas Harvard Case Solution & Analysis

What risk does each provision address and which party ultimately bears the risk?

Analyzing the various provisions with relates to the Exhibits 4

For the prevention of the risk which attracted in this deal. These provisions are made according to the depth understanding of the case and their physiological effects. These provisions are made according to the risk which are given in the Exhibits four and their respective parameters. These provisions are as follows

  • The delay in risk is overcome through stating the closing date in the agreement and charging fees on it for the delay.
  • The contract should be made according to the rules and regulations of the law which are state of Delaware.
  • The material of adverse effect should be maintained for procuring the business operation as well as the financial structure of the company.
  • Fairness opinion should involve which is based on the financial point of view which is guided by GS & Co.
  • No solicitation should be used, all the stakeholders should agree with the proposal.
  • Justification should be made in accordance with the best efforts of the organization.
  • Hell or high water, which means that stakeholder should have antitrust on the organization.

These provisions are made according to the relevance of the case and their exhibit floor. These are the main essence of the provision and provide the best solution for the merger.

Question # 03: As of early February 2009, what should Andrew Liveris (Dow’s CEO) do andwhat should Raj Gupta (Rohm and Haas’CEO) do?

Answer:

Dow was unable to carry the deal, due to the termination of the PIC deal, because the economic situation are not suitable in the in the financial market. The options available to Mr. Dow are, the deal should be completed at $78 per share, and either he should accept this or not or maybe he has been forced to do so. The second option available is to cancel the deal through the legislation, the other option available for Dow is to renegotiate the terms and condition of the deal. The downsizing and the liquidity risk in the capital market, Dow needs cash to close the deal at $78 per share, as the permanent financing is difficult to obtain due to the liquidity risk of the capital market. Furthermore, different alternative scenario for Dow is to cut the dividend, which would end the firm shortly, asset sale price would be another option to sale the asset at the forcing sale price. Moreover, issuance of further equity in the limited liquidity market is not worthy, as already the stock price of Dow has fallen to $11 per share and the market capitalization has also fall below Rohm’s capitalization. Dow can use the mix structure to generate the cash that is some cash through dividend cut, asset sale and some other source to generate the cash. Furthermore, deal is in benefit of the old shareholders of Rohm and Haas, and this would affect Dow Shareholders, employees, associated vendors, and subsidiary of the company. Furthermore, acquiring the other firm is the best strategy to adopt by Dow. Moreover, the deal can be cancel through the case prevailing in the court, but this process is quite long and difficult according to the terms and condition.

Raj Gupta will do what can be done in their best interest, completion of deal at $78 per share is the best option for the shareholders of the Rohm, as the per share market price Rohm stock would have the drastic change in these market condition. Raj should force Dow to complete the deal through litigation, he is doing so the right thing by suing Dow, and identifies that Dow has many option to raise the additional capital, even the long term issuing of debt is a possible move, firms unable to raise the high rated corporate bond even in the recession period.

Rohm and Dow has the option to delay and negotiate with the deal, this would renegotiate the loans terms for spread, loan covenant and maturity period. He would also have the option to increase its long term financing, and increase the maturity of the loan, which would increase the risk and cost associated with it. He may negotiate with K-Dow joint venture to recover the breakup fee of K-Dow deal, and he also has the plan to sue the Kuwaiti entities.................................

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