Dow Chemical 2011 Annual Report Download - page 91

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Financing Activities Related to the Acquisition of Rohm and Haas
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 and a direct
wholly owned subsidiary of the Company. Financing for the April 1, 2009 transaction included debt of $9.2 billion obtained
through a Term Loan Agreement (“Term Loan”), as well as equity investments by Berkshire Hathaway Inc. (“BHI”) and the
Kuwait Investment Authority (“KIA”) in the form of Cumulative Convertible Perpetual Preferred Stock, Series A of 3 million
shares for $3 billion (BHI) and 1 million shares for $1 billion (KIA).
In connection with the closing of the Merger, the Company entered into an Investment Agreement with certain trusts
established by members of the Haas family (the “Haas Trusts”) and Paulson & Co. Inc. (“Paulson”), each of whom was a
significant shareholder of Rohm and Haas common stock at the time of the Merger. Under the Investment Agreement, the Haas
Trusts and Paulson purchased from the Company 2.5 million shares (Haas Trusts - 1.5 million shares; Paulson - 1.0 million
shares) of Cumulative Perpetual Preferred Stock, Series B (“preferred series B”) for an aggregate price of $2.5 billion, with
$1.5 billion from the Haas Trusts and $1.0 billion from Paulson. The Haas Trusts made an additional investment in 0.5 million
shares of Cumulative Convertible Perpetual Preferred Stock, Series C (“preferred series C”) for an aggregate price of
$500 million.
In May 2009, the Company entered into a purchase agreement with the Haas Trusts and Paulson, whereby the Haas Trusts
and Paulson agreed to sell to the Company their shares of the preferred series B in consideration for shares of the Company’s
common stock and/or notes at the discretion of the Company.
On May 6, 2009, the Company launched a public offering of 150.0 million shares of its common stock. Included in the
150.0 million shares offered to the public were 83.3 million shares issued to the Haas Trusts and Paulson in a private
transaction in consideration for 1.2 million shares of preferred series B, at par plus accrued dividends, held by the Haas Trusts
and Paulson. Gross proceeds were $2,250 million, of which the Company’s net proceeds (after underwriting discounts and
commissions) were $966 million for the sale of the Company’s 66.7 million shares.
On May 7, 2009, the Company issued $6 billion of debt securities in a public offering. The offering included $1.75 billion
aggregate principal amount of 7.6 percent notes due 2014; $3.25 billion aggregate principal amount of 8.55 percent notes due
2019; and $1 billion aggregate principal amount of 9.4 percent notes due 2039. An aggregate principal amount of $1.35 billion
of the 8.55 percent notes due 2019 were offered by accounts and funds managed by Paulson and the Haas Trusts. These
investors received notes from the Company in payment for 1.3 million shares of preferred series B, at par plus accrued
dividends. The Company used the net proceeds received from this offering for refinancing, renewals, replacements and
refunding of outstanding indebtedness, including repayment of a portion of the Term Loan.
Upon the consummation of the above transactions, all shares of preferred series B were retired.
On May 26, 2009, the Company entered into an underwriting agreement and filed the corresponding shelf registration
statement to effect the conversion of preferred series C into the Company’s common stock. On June 9, 2009, following the end
of the sale period and determination of the share conversion amount, the Company issued 31.0 million shares of common stock
to the Haas Trusts and all shares of preferred series C were retired.
On August 4, 2009, the Company issued $2.75 billion of debt securities in a public offering. The offering included
$1.25 billion aggregate principal amount of 4.85 percent notes due 2012; $1.25 billion aggregate principal amount of
5.90 percent notes due 2015; and $0.25 billion aggregate principal amount of floating rate notes due 2011. The Company used
the net proceeds received from this offering for refinancing, renewals, replacements and refunding of outstanding indebtedness,
including repayment of a portion of the Term Loan.
On October 1, 2009, the remaining balance of the Term Loan was fully repaid using proceeds from the sale of the Salt
business. See Note E to the Consolidated Financial Statements for more information on the divestiture of the Salt business.
See Notes D, P, V and W to the Consolidated Financial Statements for more information on the acquisition of Rohm and
Haas and the corresponding financing activities.