Kuwaitis block Dow Chemical's slam-dunk deal for Rohm & Haas

When people describe a deal as a "slam dunk," the implication is that it's a can't-miss prospect.

The trouble is, I've seen lots of basketball games where slam-dunk attempts clang off the back of the rim or get blocked.

Rohm & Haas Co.'s acquisition by Dow Chemical Co. appeared to be a sure thing when it was announced last July.

At $78 a share, the offer was very rich and unlikely to be topped. Investors were ecstatic with the 74 percent premium being paid. Rohm & Haas CEO Raj Gupta had actively sought a buyer, so Dow Chemical's all-cash bid was a golden embrace.

What could go wrong?

How about the price of a barrel of crude oil plunging from its all-time high close of $145.29 on July 3 to below $40 in December?

While good news for chemical companies that use petroleum as raw material, it was very bad for Dow Chemical's plans to boost its presence in the Middle East.

The Kuwaiti government, nervous about the effect of low oil prices on its financial health, scuttled a $7.5 billion investment in a joint venture with Dow Chemical on Sunday. That removed a barrel of cash that Dow Chemical had planned to tap for its Rohm & Haas purchase.

With closing expected by Jan. 10, what happens now? Can Dow Chemical borrow enough to complete the deal in the midst of a global credit crisis? Will the purchase price be trimmed to closer to the $20-$30 range that some analysts estimate Rohm & Haas is now worth?

Or is the deal off? Not as of yesterday.

In any case, many investors are betting the acquisition won't get done at $78 per share. Rohm & Haas shares fell in each of the last seven trading sessions, closing yesterday at $53.34, down 16 percent or $10.22.

This game isn't over. But Kuwait's defense managed to block what seemed to be an uncontested dunk of Rohm & Haas. We'll have to wait to see who retains possession.