Is Dow Chemical Rushing Rohm & Haas Deal?

Why is Dow Chemical (DOW Quote) possibly hurrying to write a $15.3 billion check for Rohm & Haas(ROH Quote) when many observers believe it's worth less than half that amount?

According to a report Monday evening by The Associated Press, Dow plans to release a statement early Tuesday on the deal, and the merger with the company could close as soon as Thursday, the AP reported. Rohm & Haas said it will not be issuing a statement and that it does not expect to be affected by Dow's release.

The Midland, Mich.-based company could announce U.S. regulatory approval Tuesday, with European assent and a closing following on Thursday, Greenwich Consultants analyst Michael Judd said.

Dow has an incentive to close the deal by the weekend. The $78-per-share purchase price increases daily if the deal does not close by this Saturday.

"There's no reason Dow shouldn't wrap this thing up," Judd said. "Everybody thinks this thing is going to close this week."

Dow's potential move could be attributable to a deadline in its contract with Philadelphia-based Rohm & Haas that would require Dow to make steep penalty payments to Rohm if it were missed. However, a slew of analysts recommended that it ignore the deadline and back away from the deal entirely.

If global economic paralysis weren't a good enough reason for Dow Chemical to rethink the merger with Rohm & Haas, it got others on Dec. 29, when Dow learned that Kuwait was walking away from a petrochemical joint venture that was supposed to generate more than $7 billion in free cash flow for Dow.

When Dow agreed to buy Rohm & Haas for $78 a share last June, it assumed that a big chunk of the cost would be covered by funds coming in from the Kuwait venture, K-DOW.

The deal was ambushed on two fronts last week when JPMorgan Chase's Dow Chemical analyst and Credit Suisse's Rohm & Haas analyst both filed reports that criticized the merger.

In a note to clients, JPMorgan analyst Jeffrey J. Zekauskas lowered his 2009 Dow Chemical earnings forecast to $1.50 a share from $2 and slashed his price target for the firm's stock to $15 a share from $20.