Rohm and Haas (ROH) has now made it public that Dow Chemical (DOW) has a binding obligation to buy it, and that questions of whether the environment for chemical companies has gotten worse has nothing to do with consummating the transaction.

The Rohm argument is sound

Dow Chemical’s board, which is facing reasonable questions about its integrity, got a letter from Rohm yesterday.

The most important section of that letter is this paragraph:

"Dow agreed in the merger agreement to take `all action necessary’ to obtain the financing for the merger. This obligation is clear and unambiguous. It is not limited to actions that are on terms commercially favorable to Dow or indeed limited in any other manner. Dow also agreed not to take any action that is reasonably likely to prevent, impair or materially delay Dow’s ability to obtain the financing."

In many of the mergers that acquiring companies and the banks financing the transactions walked out on in 2007 and 2008, there was, in many cases, at least some evidence of "material adverse effect." The business being bought was worth less than originally anticipated. Either something had gone wrong with the target company itself or its economic environment. Even with this "out", lawsuits were necessary in a number of cases to decide which side was right.

In the case of Dow and Rohm and Haas, Dow has no such right. It has simply decided that because credit is tight and money is expensive that it can delay or pass on its obligation. The fact that a $17.4 billion deal Dow had with Kuwait from which Dow was to get $7 billion, fell apart probably makes the company even more reluctant to proceed

Whatever positive image Dow CEO Andrew Liveris had in the business community is gone now. The man simply won’t keep his word

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