Dow Chemical 2011 Annual Report Download - page 65

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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 achieved its synergy targets related to the acquisition a full quarter ahead of schedule, with realized savings
of $1.4 billion 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 integration of
Rohm and Haas was completed in the first quarter of 2011.
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 E 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 April 1, 2009 acquisition forward. In
order to provide the most meaningful comparison of results of operations, some of the comparisons made in this section to
2009 amounts 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.
Net sales for 2011 were $60.0 billion, up 12 percent from $53.7 billion in 2010. Compared with last year, price increased
13 percent and volume decreased 1 percent. The increase in price was largely driven by higher feedstock costs, and was most
pronounced in Feedstocks and Energy (up 27 percent), Coatings and Infrastructure Solutions (up 13 percent), Performance
Materials and Performance Plastics (each up 12 percent). Double-digit price increases were reported in all geographic areas,
with significant gains in Europe, Middle East and Africa ("EMEA") (up 17 percent). The decline in volume reflected the impact
of recent divestitures including: the Polypropylene business divested on September 30, 2011; the Styron business unit
("Styron") divested on June 17, 2010; the Powder Coatings business divested on June 1, 2010; and a portion of the acrylic
monomer and specialty latex businesses divested on January 25, 2010. Excluding these divestitures, sales increased 18 percent,
with volume up 4 percent and price up 14 percent. Volume improved in all segments except Coatings and Infrastructure
Solutions (which was impacted by ongoing weak fundamentals in the construction industry), with the most pronounced
increase in Agricultural Sciences (up 11 percent). Volume increased in all geographic areas, led by Latin America (up 9 percent)
and Asia Pacific (up 6 percent). See Note E to the Consolidated Financial Statements for additional information concerning the
Company's divestitures.
Net sales for 2010 were $53.7 billion, up 20 percent from reported net sales of $44.9 billion in 2009 and up 15 percent
from pro forma net sales of $46.6 billion in 2009. Sales increased in 2010 across all segments and geographic areas, with
higher prices contributing 13 percent of the improvement and increased volume adding 2 percent over 2009 pro forma results.
The increase in price was largely driven by higher feedstock and energy costs, and was most pronounced in Feedstocks and
Energy (up 28 percent), Performance Plastics (up 20 percent) and Performance Materials (up 12 percent). Double-digit price
increases were reported in all geographic areas. Volume was mixed across the segments, with significant gains in Electronic
and Functional Materials (up 20 percent) and Agricultural Sciences (up 11 percent) tempered by the impact of divestitures,
which resulted in declines in Coatings and Infrastructure Solutions (down 3 percent) and Performance Plastics (down
3 percent). The Company’s divestitures in 2010 and 2009 included Styron divested on June 17, 2010; the Powder Coatings
business divested on June 1, 2010; a portion of the acrylic monomer and specialty latex businesses divested on January 25,