Dow Chemical expects delay in Union Carbide acquisition
Discussions with US regulator stall the deal

Wall Street Journal, 7th September 2000

Dow Chemical Co. said its planned acquisition of Union Carbide Corp. probably won't happen by Sept. 30 as expected as the company strives to appease antitrust regulators.

The chemicals giant didn't set a new target date for closing, but repeated that it remains confident the deal will be completed "in the near future." Negotiations with the US Federal Trade commission have dragged out the planned $8.89 billion (10 billion pounds) stock transaction for more than a year after it was announced Aug. 4 1999.

The repeated delays, coming on top of a change in management, have created more uncertainty around Dow during a time when its shares are hitting new lows. Dow's stock has lost more than 40% of its value since the beginning of the year, when it was trading in the mid-40s. At midday Wednesday in New York Stock Exchange composite trading, the company's shares were up 63 cents to $27.81.

The transaction received approval from European Commission antitrust authorities in May after the companies agreed to sell some businesses and license some technology to competitors.

Industry experts believe the biggest sticking point in FTC negotiations is over concerns that a Dow-Carbide combination would create a plastics technology powerhouse that could dominate the market. As in Europe, Dow has probably been asked to license its technology to competitors. But Dow is renowned as a tough bargainer, and negotiating terms that Dow executives can stomach is likely proving to be a difficult and delicate task, say observers.

Despite the prolonged negotiations, analysts believe Dow has invested too much in the merger to walk away; Dow has already named the new management team for the combined companies. What Dow must wrestle with, says ING Barings analyst Paul Leming, is "How much can you give up to get the deal done and still come out ahead of where you'd be if you let the deal die?"