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Crystallizing Dow’s Transformation: The Acquisition of Rohm and HaasAndrew N. LiverisChairman and Chief Executive Officer
July 10, 2008
2July 10, 2008
SEC Disclosure Rules
► Some of our comments today may include statements about our expectations for the future. Those expectations involve risks and uncertainties. Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see our annual report and our SEC filings.
► In addition, some of our comments may reference non-GAAP financial measures. Where available, a reconciliation to the most directly comparable GAAP financial measures and other associateddisclosures are provided on the internet at www.dow.com in the Financial Reports page of the Investor Relations section.
3July 10, 2008
4July 10, 2008
ProductsProducts
SolutionsSolutions
SystemsSystemsBASICSBASICSFEEDSTOCKSFEEDSTOCKS PERFORMANCEPERFORMANCE MARKET
FACINGMARKET FACING
Technology and R&DTechnology and R&D
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
Dow’s Strategy
• Grow Performance and Specialties
• Strengthen competitiveness of Basics
5July 10, 2008
CEO Priorities for 2008►Maintain focus on financial discipline
►Close on PIC joint venture
►Transform our earnings profile
6July 10, 2008
Rohm and Haas
►Premier advanced materials and specialty chemicals company
►2007 sales of $8.9 billion
►Leading positions in electronics and coatings
►Headquartered in Philadelphia, located in27 countries
►15,700 employees
►Established in 1909
7July 10, 2008
The Ideal Company for Dow’s Transformation
►High quality global advanced materials company with a rich heritage
►Attractive presence in innovative specialty businesses
► Impressive financial profile
►Global reach into emerging markets
►Well-established culture of innovation
►Strong, experienced leadership team
8July 10, 2008
Game Changing Transaction
►A defining step in Dow’s transformation to a high growth, diversified chemicals and materials company
►An unbeatable combination – building on strengths of each other
►A highly sought after and previously unobtainable enterprise►Creates the global leader in specialty chemicals and
advanced materials►A world class portfolio with significant growth synergies►Delivers significant value for all shareholders
9July 10, 2008
Portfolio Transformation
Dow As Is Pro Forma Dow Post PIC JV / Rohm and Haas
2007 Revenues
2007 EBITDA
Dow As Is Pro Forma Dow Post PIC JV / Rohm and Haas
BasicsPerformanceData Excludes Unallocated
51% 49%69%
31%
52% 48% 67%33%
A Powerful New Dow
Feedstock-Driven Businesses Market-Driven Businesses
IndustryGrowth Rates
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials CoatingsCoatings
GDPGDP 5%5% 66--8%8% >8%>8%
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
10July 10, 2008
11July 10, 2008
Strategic Rationale
►Accelerates growth through strong operational and strategic fit
►Creates new leadership positions in key industry growth segments
►Opens new channels for existing products and technologies
►Strengthens presence in rapidly developing economies
►Fuels innovation engine
►Delivers more stable earnings with higher growth
12
SIGNIFICANTGrowth Synergies
13July 10, 2008
Growth Synergies
►$2.0 – $2.6 billion in additional value creation– Broader product portfolio, technologies, geographic reach
and market channels – Enhanced leadership positions in key industry segments
►$1.7 billion combined R&D investment– Among the largest in the industry
►Key opportunities for growth– Electronic Materials − Specialty Chemicals – Coatings − Specialty Packaging
Growth in Electronic Materials
Leader in Photoresist MaterialsLeader in Photoresist Materials
Printed Circuit Board MaterialsPrinted Circuit Board Materials
Advanced electronic low K Technology (SiLK)Advanced electronic low K Technology (SiLK)
Epoxy Resin TechnologyEpoxy Resin Technology
Display FilmsDisplay Films Polymer SciencePolymer Science
Electronic Process ChemicalsElectronic Process Chemicals State of the Art High Throughput Research CapabilitiesState of the Art High Throughput Research Capabilities
Next GenerationIntegrated CircuitsNext Generation
Integrated Circuits
Next GenerationIntegrated Circuits
Packaging
Next GenerationIntegrated Circuits
Packaging
Advanced DisplayFilms & Materials
Advanced DisplayFilms & Materials
Advanced AncillaryElectronic ChemicalsAdvanced Ancillary
Electronic Chemicals
14July 10, 2008
Growth in Coatings
Acrylic LatexesAcrylic Latexes
WaterborneCoating Materials
WaterborneCoating Materials
Next generation Epoxyand Polyurethane TechnologyNext generation Epoxyand Polyurethane Technology
Leading Position inAcrylic Market Segments
Leading Position inAcrylic Market Segments
Next generation process TechnologyNext generation process Technology
Leading Position inCoating Materials
Leading Position inCoating Materials
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
Accelerated Growth in New Applications
Accelerated Growth in New Applications
Most InnovativeMaterials OfferingMost Innovative
Materials Offering
High Performance and Lowest Cost
High Performance and Lowest Cost
Leading Technologiesand Market Position
Leading Technologiesand Market Position Unique ChemistriesUnique Chemistries
15July 10, 2008
Growth in Specialty Packaging
Differentiated AdhesivesDifferentiated Adhesives
Specialty AcrylatesSpecialty Acrylates Advanced PolymersAdvanced Polymers
Formulation TechnologyFormulation Technology
Broad Technology PlatformBroad Technology Platform
Low Energy Substrate Adhesives and Olefin Block Co-PolymersLow Energy Substrate Adhesives and Olefin Block Co-Polymers
PerformanceAdhesives
PerformanceAdhesives
Growth in Differentiated Products
Growth in Differentiated Products
Accelerated DevelopmentAccelerated
Development
MarketPull-through
MarketPull-through
Building and ConstructionChannel AccessBuilding and ConstructionChannel Access
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
16July 10, 2008
Growth in Specialty Chemicals
Acrylate ChemistryAcrylate Chemistry
Acrylic and Urethane Specialty Adhesives
Acrylic and Urethane Specialty Adhesives
Leading Polyurethane and EpoxyTechnology and Market PositionLeading Polyurethane and EpoxyTechnology and Market Position
Ion ExchangeResin Technology
Ion ExchangeResin Technology
Formulation CapabilitiesFormulation Capabilities
Cellulosics and Polymer ChemistryCellulosics and Polymer Chemistry
Faster Growth inSpecialty Polymersfor Personal Care
Faster Growth inSpecialty Polymersfor Personal Care
Enhanced Portfolio of Adhesive Materials
Enhanced Portfolio of Adhesive Materials
Growth inWater Treatment and Purification
Growth inWater Treatment and Purification
High Performance Specialty ChemicalsHigh Performance
Specialty Chemicals
Water Purification Membranesand ComponentsWater Purification Membranesand Components
High Throughput Research CapabilitiesHigh Throughput Research Capabilities
17July 10, 2008
18July 10, 2008
Geographic Synergies
►Leverages Dow’s asset light advantages
►Creates the largest R&D capability in China
►Builds on complementary strengths in emerging geographiesAsia Pacific: Dow 11 percent of sales
Rohm and Haas 22 percent of sales
Latin America: Dow 11 percent of salesRohm and Haas 4 percent of sales
19July 10, 2008
A Highly Disciplined Approach
►Excellent strategic fit
►World class high quality enterprise
►Meets all of Dow’s acquisition criteria
►Significant cost synergies
►Powerful growth synergies
20
FinancialsGeoffery E. MerszeiExecutive Vice Presidentand Chief Financial Officer
21July 10, 2008
►Rohm and Haas shareholders’ approval►Customary regulatory approvals and conditions►Closing expected by early 2009
►Rohm and Haas shareholders’ approval►Customary regulatory approvals and conditions►Closing expected by early 2009
Transaction Summary
►Unanimously approved by both Boards of Directors►Shareholders of 32% of Rohm and Haas stock, including Haas family
representatives, have entered into agreements to support the transaction
►Unanimously approved by both Boards of Directors►Shareholders of 32% of Rohm and Haas stock, including Haas family
representatives, have entered into agreements to support the transaction
►47.9% premium to Rohm and Haas 60-day average price ►28.7% premium to its 2008 closing high►47.9% premium to Rohm and Haas 60-day average price ►28.7% premium to its 2008 closing high
►Dow to acquire Rohm and Haas for $78 per share►Dow to acquire Rohm and Haas for $78 per share
►$3 billion equity investment by Berkshire Hathaway and $1 billion by Kuwait Investment Authority
►Debt financing committed by Citi, Merrill Lynch and Morgan Stanley
►$3 billion equity investment by Berkshire Hathaway and $1 billion by Kuwait Investment Authority
►Debt financing committed by Citi, Merrill Lynch and Morgan Stanley
Price
Premium
Approvals
Financing
Key Conditions& Timing
22July 10, 2008
Comparable Transactions
(1) Includes run-rate synergies $200mm for BASF, $375mm for Akzo Nobel, $100mm for PPG, and $800mm for Dow Chemical.
(2) Assumes 2008E EBITDA of $1,645 million.
Acquirer / Target
FV / LTMEBITDA
FV / LTM EBITDA
including cost synergies(1)
BASF / Engelhard
Akzo Nobel / Imperial Chemical Industries
PPG / SigmaKalon
Dow Chemical / Rohm and Haas
12.4x 9.6x
10.9x 8.5x
11.8x 7.8x
11.5x (2) 7.7x (2)
23July 10, 2008
Significant Cost Synergies
►At least $800 million in annual pre-tax synergies
►Phased in over two years
Shared Servicesand Governance
Purchasing SynergiesIncluding Raw Materials
Manufacturing / Supply Chain Work Process Improvements
Corporate Business Development Overlap
35%35% 35%35%
10%10% 20%20%
24July 10, 2008
Dow Synergy Track Record
Cost synergies as a percent of target revenue
Union Carbide 18% delivered
Rohm and Haas Ag 16% delivered
Angus Chemicals 15% delivered
EniChem Polyurethanes 14% delivered
Gurit-Essex 16% delivered
Rohm and Haas 9% target
25July 10, 2008
Shareholder Value Creation
►Accelerates revenue growth and improves margins– Increases percentage of revenues from higher margin,
higher growth specialty business– Reduces volatility and increases growth in earnings
2007 – 2012Industry Growth Rates
SOURCE: SRI Consulting, CMAI, Company filings and presentations
Dow 4%
Rohm and Haas 5 – 9%
Dow + Rohm and Haas 5 – 7%
26July 10, 2008
Shareholder Value Creation
Meets all Dow acquisition criteria and maximizes long-term shareholder value
►Strong operational and strategic fit
►Meaningfully accretive to earnings in second year of transaction
►Significant synergy opportunity
►Exceeds internal return requirements
27July 10, 2008
Retains Financial Flexibility
►Attractive and diverse transaction funding– Deploy proceeds from PIC joint venture– Equity investment by Berkshire Hathaway
and Kuwait Investment Authority– Debt funding (bridge) provided by Citi, Merrill Lynch
and Morgan Stanley
►Maintains solid investment grade credit rating
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Summary
29July 10, 2008
Leveraging Rohm and Haas Strengths
►Advanced Materials business unit headquartered in Philadelphia
►Customer, market focus and innovative culture of Rohm and Haas will be preserved and leveraged
►Rohm and Haas corporate name retained for Dow’s new Advanced Materials division
►Add complementary Dow businesses to create a~$13 billion Rohm and Haas Advanced Materials portfolio
A Powerful New Dow
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials CoatingsCoatings
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
Feedstock-Driven Businesses Market-Driven Businesses
30July 10, 2008
A Powerful New Dow
Feedstock-Driven Businesses Market-Driven Businesses
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials CoatingsCoatings
2/3 Specialties2/3 Specialties
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
31July 10, 2008
A Powerful New Dow
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials CoatingsCoatings
Dow Coating Solutions
Adv. Elec. Materials
DesignedPolymers
Specialty Packaging
EpoxySystems
PolyurethaneSystems
Feedstock-Driven Businesses Market-Driven Businesses
2/3 Specialties2/3 Specialties
32July 10, 2008
33July 10, 2008
A Powerful New Dow
0
4
8
12
2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next IndustryPeak (2015)
Earn
ings
per
Sha
re
>$10.00
$3.50
$4.37 Prior Target
$0.34
34July 10, 2008
A Powerful New Dow
0
4
8
12
2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next IndustryPeak (2015)
>$10.00
$3.50
$4.37~$4.00
With Rohm and Haas
Earn
ings
per
Sha
re
$0.34
35July 10, 2008
Game Changing Transaction
►A defining step in Dow’s transformation to a high growth diversified chemicals and materials company
►An unbeatable combination – building on strengths of each other
►A highly sought after and previously unobtainable enterprise►Creates the global leader in specialty chemicals and
advanced materials►A world class portfolio with significant growth synergies►Delivers significant value for all shareholders
36July 10, 2008