The Dow Chemical Company (NYSE: DOW) has commenced a public offering of common stock to shore up its balance sheet after closing its recent huge merger (acquisition) with Rohm & Haas.   It will raise approximately $1.625 billion in the sale.  Roughly $1 billion of the proceeds will be through shares offered by the company itself and roughly $625 million will be through shares offered by accounts and funds managed by Paulson & Co. and trusts created by members of the Haas Family.  This might not be the only offering to raise capital.

Interestingly enough, these investors have agreed to sell a portion of their shares of Dow’s Perpetual Preferred Stock, Series B to Dow at par plus accrued dividends for shares of common stock which are subsequently being sold in the offering.

Morgan Stanley, Citi, Merrill Lynch, and HSBC Securities are acting as joint book-running managers for the offering.  The holders have granted a 15% of the total number of shares offered to cover over-allotments.  This offering is also part of an existing shelf registration statement.

Dow said that it intends to use the $1 billion of proceeds to repay a portion of its $9.2 billion term loan agreement borrowings, which were used to pay for a portion of the buyout of Rohm & Haas.

As noted, this might not be the last offering.  The press release noted that that the company is also considering a potential offering of senior unsecured notes in a registered public offering, but none of the offerings would be contingent upon each other.

Shares closed down marginally at $16.33 today with a $15 billion market cap, and shares are indicated down 3.5% at $15.75 in the after-hours session.  The 52-week trading range is $5.89 to $43.43.

Jon C. Ogg