Paulson & Co., the hedge fund run by billionaire John Paulson, urged Dow Chemical Co. to slash its dividend, sell new stock and issue bonds to pay for the stalled $15.4 billion takeover of Rohm & Haas Co, Bloomberg reported.
Dow should tap its committed $13 billion bridge loan and $4 billion of equity financing to complete the deal, which was supposed to close Jan. 27, Paulson said today in a statement. Dow could then repay the bridge financing with $4 billion of new equity and $5 billion of new bonds. Paulson, which manages $29 billion, is Rohm & Haas's second-largest shareholder.
Dow Chief Executive Officer Andrew Liveris has said that completing the takeover without better financing or asset sales would be a "catastrophe." Dow this week said it lost $1.55 billion in the fourth quarter amid the weakest global demand for chemicals and plastics in more than 25 years. Paulson said it would "seriously consider" buying new Dow equity.
"We don't believe that by intentionally refusing to close the transaction that you are benefiting your shareholders," Paulson wrote to Liveris in a letter dated yesterday. "By cutting the dividend and raising common equity, Dow should be able to maintain its investment-grade credit rating and access the credit markets."
Midland, Michigan-based Dow Chemical gained 14 cents, or 1.3 percent, to $10.91 at 4:15 p.m. in New York Stock Exchange composite trading. Philadelphia-based Rohm & Haas rose $1.02, or 1.9 percent, to $54.77. Dow agreed to buy Rohm & Haas in July for $78 a share.