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Dow, Rohm & Haas in Settlement Talks; Still No Agreement

Dow Chemical and Rohm & Haas, which will face off in a Delaware court next Monday to determine whether Dow must complete its $78-a-share deal to acquire Rohm & Haas, are engaged in talks to find a resolution to their dispute, CNBC has learned.

The talks, however, are far from certain to produce an agreement, according to sources.

The discussions are centered on a proposal from Rohm & Haas' two largest shareholders—the Haas Family Trust and the hedge fund Paulson & Co.—which would involve those two firms taking their proceeds from a Dow purchase of Rohm & Haas and investing that money back in Dow in the form of a preferred security.

A month ago, in an open letter to Dow Chemical, John Paulson, whose firm owns 19 million Rohm & Haas shares, urged Dow to complete the deal, suggesting among other things that it cut its dividend to a penny and sell $4 billion worth of common stock post closing to give it the financial where withdrawal to complete a deal and stay financially strong.

The Haas Family and Paulson control roughly $3 billion worth of Rohm & Haas stock.

Investors are hoping that the cash infusion to Dow in the form of a preferred could prevent a credit downgrade of Dow’s debt and thereby alleviate its concern over carrying on the deal.

Dow is believed to be meeting the rating agency Standard & Poor's on Thursday in order to gauge whether the plan would work to prevent a downgrade.

  • Get Real-Time Quotes for Dow Chemicals and Rohm & Haas

Still, it remains uncertain that even with an approval from the rating agencies, Dow would move ahead with a deal, especially if it does not involve a price cut.

Officials at Rohm & Haas and Dow and their advisors declined to comment. Paulson & Co. and Haas Family have not returned calls.

Dow Shares Hit 24-Year Low

Dow shares hit a new 24-year low on Thursday ahead of the trial.

Alongside a broad-based pummeling of U.S. stocks, shares of Dow slid to $6.31—a price last seen in April 1985—before partly recovering to about $6.70 after CNBC's report on the settlement talks.

- Reuters contributed to this report.

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