RE: Rohm & Haas Co. (ROH) by Dow Chemical Co. (DOW)

Acquirer: DOW
Target: ROH
Offer per share: $78 cash
Target share price: $56.76
Expected closing: 1/15/2009
ROI: 37.42%
Annualized gain: off the charts

The reason for the huge gap is the dumping of the Kuwait/DOW partnership this past weekend.  Many feel the deal for ROH will get cancelled, since DOW was counting on billions from the Kuwait partnership to use in the ROH deal.

Here’s why this *might* still be a buy if you are feeling lucky: DOW still has an intact bridge loan for the full deal amount and can, technically, still do the deal before the end of January 2009.  If you buy now on the huge price drop of ROH, and DOW goes through on the deal at the current offer, you’ll make a killing in your annualized return on this arbitrage.

However– I think it is obvious the banks that are funding the bridge loan for the deal will pressure DOW to either 1) cancel the deal or 2) renegotiate the deal offer price downwards.

I am watching this one for now only, not buying–  It is too hot a potato for me.  I got burned on the HUN deal, so I am playing my next few arb deals a little bit safer.

If I had the cash to risk losing (and I mean really losing it all), I would consider this deal, as the payoff is huge if it goes through, even at a lower offer price.