Dow Chemical Co. will buy rival Rohm and Haas Co for $18.8 billion, in a move to broaden its product offerings in the paints, coatings and electronic materials.
Financing for the acquisition includes an equity investment by billionaire Warren Buffett's Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred securities for $3 billion and $1 billion, respectively.
The move is the latest by Dow Chemical Chief Executive Officer Andrew Liveris to move the company away from basic chemicals toward the higher-margin, specialty-chemicals markets. The deal will create one of the nation’s largest makers of specialty chemicals, and helps both companies gain scale at a time when commodities prices are still rising.
Dow said the deal would be "meaningfully accretive" to earnings in the second year after it closes, with pre-tax synergies expected to be at least $800 million per year.
Dow will create an advanced-materials business unit at Rohm and Haas' current Philadelphia headquarters that will have a total annual revenue of nearly $13 billion, upon completion.
Two Rohm and Haas directors will join the Dow's board, bringing the total size of Dow's board to 14.
Raj L. Gupta, Rohm and Haas’s chairman and chief executive, said, “In its 100-year history, Rohm and Haas has constantly reinvented itself, and this agreement offers outstanding potential to do the same yet again.”