dow aquire rohm & hass
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Crystallizing Dows Transformation: The Acquisition of Rohm and HaasAndrew N. LiverisChairman and Chief Executive Officer
July 10, 2008
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2July 10, 2008
SEC Disclosure Rules
Some of our comments today may include statements about our expectations for the future. Those expectations involve risks and uncertainties. Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see our annual report and our SEC filings.
In addition, some of our comments may reference non-GAAP financial measures. Where available, a reconciliation to the most directly comparable GAAP financial measures and other associateddisclosures are provided on the internet at www.dow.com in the Financial Reports page of the Investor Relations section.
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ProductsProducts
SolutionsSolutions
SystemsSystemsBASICSBASICSFEEDSTOCKSFEEDSTOCKS PERFORMANCEPERFORMANCE MARKET FACING
MARKET FACING
Technology and R&DTechnology and R&D
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
Dows Strategy
Grow Performance and Specialties
Strengthen competitiveness of Basics
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CEO Priorities for 2008Maintain focus on financial discipline
Close on PIC joint venture
Transform our earnings profile
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Rohm and Haas
Premier advanced materials and specialty chemicals company
2007 sales of $8.9 billion
Leading positions in electronics and coatings
Headquartered in Philadelphia, located in27 countries
15,700 employees
Established in 1909
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The Ideal Company for Dows Transformation
High quality global advanced materials company with a rich heritage
Attractive presence in innovative specialty businesses
Impressive financial profile
Global reach into emerging markets
Well-established culture of innovation
Strong, experienced leadership team
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Game Changing Transaction
A defining step in Dows transformation to a high growth, diversified chemicals and materials company
An unbeatable combination building on strengths of each other
A highly sought after and previously unobtainable enterpriseCreates the global leader in specialty chemicals and
advanced materialsA world class portfolio with significant growth synergiesDelivers significant value for all shareholders
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Portfolio Transformation
Dow As Is Pro Forma Dow Post PIC JV / Rohm and Haas
2007 Revenues
2007 EBITDA
Dow As Is Pro Forma Dow Post PIC JV / Rohm and Haas
BasicsPerformanceData Excludes Unallocated
51% 49% 69%31%
52% 48% 67%33%
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A Powerful New Dow
Feedstock-Driven Businesses Market-Driven Businesses
IndustryGrowth Rates
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials
CoatingsCoatings
GDPGDP 5%5% 66--8%8% >8%>8%
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
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Strategic Rationale
Accelerates growth through strong operational and strategic fit
Creates new leadership positions in key industry growth segments
Opens new channels for existing products and technologies
Strengthens presence in rapidly developing economies
Fuels innovation engine
Delivers more stable earnings with higher growth
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SIGNIFICANTGrowth Synergies
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Growth Synergies
$2.0 $2.6 billion in additional value creation Broader product portfolio, technologies, geographic reach
and market channels Enhanced leadership positions in key industry segments
$1.7 billion combined R&D investment Among the largest in the industry
Key opportunities for growth Electronic Materials Specialty Chemicals Coatings Specialty Packaging
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Growth in Electronic Materials
Leader in Photoresist MaterialsLeader in Photoresist Materials
Printed Circuit Board MaterialsPrinted Circuit Board Materials
Advanced electronic low K Technology (SiLK)Advanced electronic low K Technology (SiLK)
Epoxy Resin TechnologyEpoxy Resin Technology
Display FilmsDisplay Films Polymer SciencePolymer Science
Electronic Process ChemicalsElectronic Process Chemicals State of the Art High Throughput Research CapabilitiesState of the Art High Throughput Research Capabilities
Next GenerationIntegrated CircuitsNext Generation
Integrated Circuits
Next GenerationIntegrated Circuits
Packaging
Next GenerationIntegrated Circuits
Packaging
Advanced DisplayFilms & Materials
Advanced DisplayFilms & Materials
Advanced AncillaryElectronic ChemicalsAdvanced Ancillary
Electronic Chemicals
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Growth in Coatings
Acrylic LatexesAcrylic Latexes
WaterborneCoating Materials
WaterborneCoating Materials
Next generation Epoxyand Polyurethane TechnologyNext generation Epoxyand Polyurethane Technology
Leading Position inAcrylic Market Segments
Leading Position inAcrylic Market Segments
Next generation process TechnologyNext generation process Technology
Leading Position inCoating Materials
Leading Position inCoating Materials
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
Accelerated Growth in New Applications
Accelerated Growth in New Applications
Most InnovativeMaterials OfferingMost Innovative
Materials Offering
High Performance and Lowest Cost
High Performance and Lowest Cost
Leading Technologiesand Market Position
Leading Technologiesand Market Position Unique ChemistriesUnique Chemistries
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Growth in Specialty Packaging
Differentiated AdhesivesDifferentiated Adhesives
Specialty AcrylatesSpecialty Acrylates Advanced PolymersAdvanced Polymers
Formulation TechnologyFormulation Technology
Broad Technology PlatformBroad Technology Platform
Low Energy Substrate Adhesives and Olefin Block Co-PolymersLow Energy Substrate Adhesives and Olefin Block Co-Polymers
PerformanceAdhesives
PerformanceAdhesives
Growth in Differentiated Products
Growth in Differentiated Products
Accelerated DevelopmentAccelerated
Development
MarketPull-through
MarketPull-through
Building and ConstructionChannel AccessBuilding and ConstructionChannel Access
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
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Growth in Specialty Chemicals
Acrylate ChemistryAcrylate Chemistry
Acrylic and Urethane Specialty Adhesives
Acrylic and Urethane Specialty Adhesives
Leading Polyurethane and EpoxyTechnology and Market PositionLeading Polyurethane and EpoxyTechnology and Market Position
Ion ExchangeResin Technology
Ion ExchangeResin Technology
Formulation CapabilitiesFormulation Capabilities
Cellulosics and Polymer ChemistryCellulosics and Polymer Chemistry
Faster Growth inSpecialty Polymersfor Personal Care
Faster Growth inSpecialty Polymersfor Personal Care
Enhanced Portfolio of Adhesive Materials
Enhanced Portfolio of Adhesive Materials
Growth inWater Treatment and Purification
Growth inWater Treatment and Purification
High Performance Specialty ChemicalsHigh Performance
Specialty Chemicals
Water Purification Membranesand ComponentsWater Purification Membranesand Components
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
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Geographic Synergies
Leverages Dows asset light advantages
Creates the largest R&D capability in China
Builds on complementary strengths in emerging geographiesAsia Pacific: Dow 11 percent of sales
Rohm and Haas 22 percent of sales
Latin America: Dow 11 percent of salesRohm and Haas 4 percent of sales
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A Highly Disciplined Approach
Excellent strategic fit
World class high quality enterprise
Meets all of Dows acquisition criteria
Significant cost synergies
Powerful growth synergies
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FinancialsGeoffery E. MerszeiExecutive Vice Presidentand Chief Financial Officer
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Rohm and Haas shareholders approvalCustomary regulatory approvals and conditionsClosing expected by early 2009Rohm and Haas shareholders approvalCustomary regulatory approvals and conditionsClosing expected by early 2009
Transaction Summary
Unanimously approved by both Boards of DirectorsShareholders of 32% of Rohm and Haas stock, including Haas family
representatives, have entered into agreements to support the transaction
Unanimously approved by both Boards of DirectorsShareholders of 32% of Rohm and Haas stock, including Haas family
representatives, have entered into agreements to support the transaction
47.9% premium to Rohm and Haas 60-day average price 28.7% premium to its 2008 closing high47.9% premium to Rohm and Haas 60-day average price 28.7% premium to its 2008 closing high
Dow to acquire Rohm and Haas for $78 per shareDow to acquire Rohm and Haas for $78 per share
$3 billion equity investment by Berkshire Hathaway and $1 billion by Kuwait Investment Authority
Debt financing committed by Citi, Merrill Lynch and Morgan Stanley$3 billion equity investment by Berkshire Hathaway and $1 billion by Kuwait
Investment Authority Debt financing committed by Citi, Merrill Lynch and Morgan Stanley
Price
Premium
Approvals
Financing
Key Conditions& Timing
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Comparable Transactions
(1) Includes run-rate synergies $200mm for BASF, $375mm for Akzo Nobel, $100mm for PPG, and $800mm for Dow Chemical.
(2) Assumes 2008E EBITDA of $1,645 million.
Acquirer / Target
FV / LTMEBITDA
FV / LTM EBITDA
including cost synergies(1)
BASF / Engelhard
Akzo Nobel / Imperial Chemical Industries
PPG / SigmaKalon
Dow Chemical / Rohm and Haas
12.4x 9.6x
10.9x 8.5x
11.8x 7.8x
11.5x (2) 7.7x (2)
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Significant Cost Synergies
At least $800 million in annual pre-tax synergies
Phased in over two years
Shared Servicesand Governance
Purchasing SynergiesIncluding Raw Materials
Manufacturing / Supply Chain Work Process Improvements
Corporate Business Development Overlap
35%35% 35%35%
10%10% 20%20%
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Dow Synergy Track Record
Cost synergies as a percent of target revenue
Union Carbide 18% delivered
Rohm and Haas Ag 16% delivered
Angus Chemicals 15% delivered
EniChem Polyurethanes 14% delivered
Gurit-Essex 16% delivered
Rohm and Haas 9% target
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Shareholder Value Creation
Accelerates revenue growth and improves margins Increases percentage of revenues from higher margin,
higher growth specialty business Reduces volatility and increases growth in earnings
2007 2012Industry Growth Rates
SOURCE: SRI Consulting, CMAI, Company filings and presentations
Dow 4%
Rohm and Haas 5 9%
Dow + Rohm and Haas 5 7%
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Shareholder Value Creation
Meets all Dow acquisition criteria and maximizes long-term shareholder value
Strong operational and strategic fit
Meaningfully accretive to earnings in second year of transaction
Significant synergy opportunity
Exceeds internal return requirements
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Retains Financial Flexibility
Attractive and diverse transaction funding Deploy proceeds from PIC joint venture Equity investment by Berkshire Hathaway
and Kuwait Investment Authority Debt funding (bridge) provided by Citi, Merrill Lynch
and Morgan Stanley
Maintains solid investment grade credit rating
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Summary
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Leveraging Rohm and Haas Strengths
Advanced Materials business unit headquartered in Philadelphia
Customer, market focus and innovative culture of Rohm and Haas will be preserved and leveraged
Rohm and Haas corporate name retained for Dows new Advanced Materials division
Add complementary Dow businesses to create a~$13 billion Rohm and Haas Advanced Materials portfolio
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A Powerful New Dow
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials
CoatingsCoatings
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
Feedstock-Driven Businesses Market-Driven Businesses
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A Powerful New Dow
Feedstock-Driven Businesses Market-Driven Businesses
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials
CoatingsCoatings
2/3 Specialties2/3 Specialties
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
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A Powerful New Dow
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials
CoatingsCoatings
Dow Coating Solutions
Adv. Elec. Materials
DesignedPolymers
Specialty Packaging
EpoxySystems
PolyurethaneSystems
Feedstock-Driven Businesses Market-Driven Businesses
2/3 Specialties2/3 Specialties
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A Powerful New Dow
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4
8
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2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next IndustryPeak (2015)
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>$10.00
$3.50
$4.37 Prior Target
$0.34
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34July 10, 2008
A Powerful New Dow
0
4
8
12
2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next IndustryPeak (2015)
>$10.00
$3.50
$4.37~$4.00
With Rohm and Haas
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i
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g
s
p
e
r
S
h
a
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$0.34
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35July 10, 2008
Game Changing Transaction
A defining step in Dows transformation to a high growth diversified chemicals and materials company
An unbeatable combination building on strengths of each other
A highly sought after and previously unobtainable enterpriseCreates the global leader in specialty chemicals and
advanced materialsA world class portfolio with significant growth synergiesDelivers significant value for all shareholders
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36July 10, 2008