Dow Chemical 2009 Annual Report Download - page 63

Table of Contents
end, credit conditions remain tight, and the lingering impacts of the financial crisis continue in these regions. Emerging geographies, however, are projected to
continue leading the economic recovery. Strong growth is expected in developing countries such as Brazil, India and China, which have been among the fastest
to rebound from the global financial crisis on the back of robust local demand and steadily improving export markets. The Company will continue to
implement its strategic transformation and remain focused on reducing financial leverage, while preferentially investing in its Performance businesses and in
emerging geographies.
Dow’s results of operations and financial condition for the year ended December 31, 2009 are described in further detail in the following discussion and
analysis.
ACQUISITION OF ROHM AND HAAS COMPANY
On April 1, 2009, the Company completed the acquisition of Rohm and Haas. Pursuant to the July 10, 2008 Agreement and Plan of Merger (the “Merger
Agreement”), Ramses Acquisition Corp., a direct wholly owned subsidiary of the Company, merged with and into Rohm and Haas (the “Merger”), with Rohm
and Haas continuing as the surviving corporation becoming a direct wholly owned subsidiary of the Company.
The Company pursued the acquisition of Rohm and Haas to make the Company a leading specialty chemicals and advanced materials company,
combining the two organizations’ best-in-class technologies, broad geographic reach and strong industry channels to create a business portfolio with
significant growth opportunities.
Pursuant to the terms and conditions of the Merger Agreement, each outstanding share of Rohm and Haas common stock was converted into the right to
receive cash of $78 per share, plus additional cash consideration of $0.97 per share. The additional cash consideration represented 8 percent per annum on
the $78 per share consideration from January 10, 2009 to the closing of the Merger, less dividends declared by Rohm and Haas with a dividend record date
between January 10, 2009 and the closing of the Merger. All options to purchase shares of common stock of Rohm and Haas granted under the Rohm and
Haas stock option plans and all other Rohm and Haas equity-based compensation awards, whether vested or unvested as of April 1, 2009, became fully
vested and converted into the right to receive cash of $78.97 per share, less any applicable exercise price. Total cash consideration paid to Rohm and Haas
shareholders was $15.7 billion.
The Company expects the transaction to create $1.3 billion in estimated pretax annual cost synergies and savings including increased purchasing power
for raw materials; manufacturing and supply chain work process improvements; and the elimination of redundant corporate overhead for shared services and
governance. The Company also anticipates that the transaction will produce significant growth synergies through the application of each company’s innovative
technologies and as a result of the combined businesses’ broader product portfolio in key industry segments with strong global growth rates.
On July 31, 2009, the Company entered into a definitive agreement for the sale of certain acrylic monomer and specialty latex assets, as required by the
United States Federal Trade Commission (“FTC”), for approval of the April 1, 2009 acquisition of Rohm and Haas (see Note D to the Consolidated Financial
Statements). The transaction closed on January 25, 2010.
RESULTS OF OPERATIONS
Results of Rohm and Haas are included in the Company’s consolidated results from the acquisition forward. In order to provide the most meaningful
comparison of results of operations, the 2009 versus 2008 comparisons for net sales are presented on a pro forma basis, reflecting the combination of Dow
and Rohm and Haas assuming the transaction had been consummated on January 1, 2008. Comparisons for 2008 versus 2007 are on an actual, reported
basis.
Net sales for 2009 were $44.9 billion, down 22 percent from $57.4 billion in 2008. On a pro forma basis, net sales for 2009 were $46.6 billion down
from pro forma net sales of $66.9 billion in 2008. Compared with 2008 on a pro forma basis, prices fell 17 percent, with double-digit price decreases in all
operating segments, with the exception of Electronic and Specialty Materials (down 4 percent), Health and Agricultural Sciences (down 6 percent) and
Coatings and Infrastructure (down 7 percent) and in all geographic areas. Price declines were most pronounced in the Basics segments, with Basic Chemicals
and Hydrocarbons and Energy each down 28 percent and Basic Plastics down 27 percent, driven by significantly lower feedstock and energy costs. From a
geographic standpoint, price declines were most pronounced in Latin America and Europe, where prices declined 21 percent. Volume decreased 13 percent as a
result of the continued weakness in the global economy with declines in all operating segments except Health and Agricultural Sciences, which reported growth
of 4 percent. Volume decreases were most pronounced in North America (down 18 percent) from reduced levels in 2008 due to Hurricanes Gustav and Ike
which hit the U.S. Gulf Coast, resulting in temporary plant outages and Europe (down 15 percent).
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