Filed under: Deals When it comes to a mega M&A deal that involves an old-line company and a founding family, Warren Buffett is often on speed-dial. For example, his firm, Berkshire Hathaway (NYSE: BRK.A ), provided $4.4 billion in financing for the Wrigley Co. (NYSE: WWY ) buyout. Now,Warren is plunking down some more cash on another big deal: Dow Chemical Co's (NYSE: DOW ) $18.8 billion cash purchase of Rohm & Haas Co. (NYSE: ROH ). In this case, the contribution comes to about $3 billion in the form of a convertible preferred structure, which has a nice 8.5% coupon rate. As a result, Berkshire will become Dow's largest shareholder. Yes, the US economy continues to be bleak and there is lots of fear. But for long-term investors such as Warren Buffett, this is an ideal time to pick up juicy opportunities. In fact, this is evidence that the smart money sees lots of value from M&A deals - especially transformative ones. Then again, in order to compete on a global scale, there is a need for economies of scale. For the most part, Dow focuses on petroleum-based chemicals. As for Rohm & Haas, it deals primarily with adhesives, personal care products, paints and so on. In other words, Dow is trying to find ways to diversify things. However, the deal for Rohm & Haas is no slam dunk. It's not easy to make such a transaction in a tough economic environment. Plus, Dow is paying a massive premium - thus setting a high bar for performance. Tom ...
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Filed under: Deals When it comes to a mega M&A deal that involves an old-line company and a founding family, Warren Buffett is often on speed-dial. For example, his firm, Berkshire Hathaway (NYSE: BRK.A ), provided $4.4 billion in financing for the Wrigley Co. (NYSE: WWY ) buyout. Now,Warren is plunking down some more cash on another big deal: Dow Chemical Co's (NYSE: DOW ) $18.8 billion cash purchase of Rohm & Haas Co. (NYSE: ROH ). In this case, the contribution comes to about $3 billion in the form of a convertible preferred structure, which has a nice 8.5% coupon rate. As a result, Berkshire will become Dow's largest shareholder. Yes, the US economy continues to be bleak and there is lots of fear. But for long-term investors such as Warren Buffett, this is an ideal time to pick up juicy opportunities. In fact, this is evidence that the smart money sees lots of value from M&A deals - especially transformative ones. Then again, in order to compete on a global scale, there is a need for economies of scale. For the most part, Dow focuses on petroleum-based chemicals. As for Rohm & Haas, it deals primarily with adhesives, personal care products, paints and so on. In other words, Dow is trying to find ways to diversify things. However, the deal for Rohm & Haas is no slam dunk. It's not easy to make such a transaction in a tough economic environment. Plus, Dow is paying a massive premium - thus setting a high bar for performance. Tom ...