4/21/2008

Forbes.com

Specialty chemical company Rohm and Haas has more time and money to focus on its core business after cashing out on a ten-year-old investment. The company can put that capital to good use, paying off debt and developing new products for use in semiconductors.

Philadelphia-based Rohm and Haas announced Friday that it will sell it’s 40.0% equity stake in the South Korean firm UP Chemical. In 1998, Rohm and Haas invested $3.5 million in the company, which specializes in electronic material technologies used to make advanced semiconductors. At that time, the investment was a good window for Rohm and Haas to get into the growing business.

Recently, however, Rohm and Haas has been developing similar products internally, said Longbow Research analyst Dmitry Silversteyn, and fostering better deals with new partners.

One such deal involves Rohm and Haas’ Electronic Materials division’s exclusive licensing agreement with Harvard University, signed last year. Under the agreement, Rohm and Haas will be the sole manufacturer and marketer of a new class of amidinate compounds, the “next generation” of materials used in advanced semiconductors. Using atomic layer deposition, or ALD, thin films of metals and metal compounds improve performance of semiconductors.

Friday’s announcement from Rohm and Haas stated that it would sell its equity investment to Woori Consortium, a life insurance partnership made up of South Korean-based Woori Finance Holdings and Aviva of London. Woori Consortium agreed to pay $112.0 million for the stake in UP Chemical, 32 times the cost to Rohm and Haas just 10 years ago.

Silversteyn said he is “surprised they got as much as they did” but added that “it shows that in 10 years Rohm and Haas helped move that business in a positive direction.”

The sale also helps Rohm and Haas “clean up their portfolio,” Silversteyn said, and allows management to focus more time on the company’s core business.

Capital raised may be put towards the company’s debt from buying back shares, or for future acquisitions. Either way, it’s a “step in the right direction and a more productive use of this money going forward,” Silversteyn added.

Rohm and Haas expects the sale to result in a 22-cent gain per diluted share for its second-quarter earnings, but expects its full-year affiliate income to fall by 4 cents per share as the cash flow from the investment ends.

Investors seem pleased with the divestiture, bidding Rohm stock up 88 cents, or 1.6%, to close at $57.33 in Friday trading.

Source: Forbes.com

Miriam Marcus, 04.04.08, 4:45 PM ET