Jan. 5 (Bloomberg) -- Dow Chemical Co. may try to reduce the price it agreed to pay for Rohm & Haas Co. by about 35 percent after it lost cash targeted for the buyout, investors and analysts said.

A “reasonable” price for Philadelphia-based Rohm & Haas would be about $50 a share, or about twice the value at which competitors such as DuPont Co. are trading, said Stephen Hoedt, an analyst at National City Corp. In July, Dow agreed to pay $78 a share for Rohm & Haas to gain production of materials used in electronics and paints.

Kuwait canceled a plastics joint venture with Dow last month, depriving the Midland, Michigan-based chemicals maker of $9 billion it planned to use for the Rohm & Haas purchase. While the collapse of the Kuwait deal hurts Dow’s strategy of gaining access to low-cost petroleum used to produce chemicals, Hoedt said, it may be an opportunity to renegotiate the $15.4 billion Rohm & Haas deal.

“Dow would be prudent to seek a steep concession from Rohm & Haas,” Hassan Ahmed, a New York-based analyst at HSBC Securities, said in an interview. “Dow could get a 30 percent to 40 percent cut, to about $50 a share.”

Dow can’t pay a breakup fee to end the deal, said Emily Riley, a Rohm & Haas spokeswoman. The merger agreement’s reference to a “reverse termination fee” of $750 million to be paid by Dow is only applicable if the deal doesn’t get U.S. and European antitrust approvals by Oct. 10, she said.

If the transaction isn’t completed by Jan. 10, the price Dow must pay for Rohm & Haas will increase by 8 percent a year, or about $100 million a month, until July 10, Rohm & Haas said in a Sept. 29 regulatory filing.

Companies Communicating

The transaction isn’t contingent on Dow’s financing, and the two companies continue to communicate about merging, Riley said. She declined to comment on whether the companies are negotiating a revised deal.

“From our perspective, we are in the same situation, moving toward an early 2009 close,” Riley said.

Rohm & Haas fell 94 cents, or 1.5 percent, to $63.82 at 4:15 p.m. in New York Stock Exchange composite trading. Dow Chemical dropped 36 cents, or 2.3 percent, to $15.05. Rohm & Haas rose 16 percent last year, and Dow tumbled 62 percent.

Lacking an easier way to end the transaction, Dow Chemical could get an opinion that the combined company wouldn’t be solvent, a move that also could be made by the banks that have agreed to lend Dow $13 billion to complete the deal, Hoedt said. Rohm & Haas would be trading at about $25 a share if not for Dow’s buyout agreement, he said.

‘Low 50s’

“As an investor in Dow, I was a bit unhappy with the price they agreed to pay for Rohm & Haas to begin with,” Hoedt said in a telephone interview from Cleveland. “The low 50s is more a reflection of the world today.”

David Begleiter, an analyst at Deutsche Bank AG, said last week that Dow Chemical would probably negotiate a new transaction price of less than $70 a share.

Investors such as Gene Pisasale, who helps oversee about $13 billion at PNC Capital Advisors in Baltimore, said last week that Warren Buffett, whose Berkshire Hathaway Inc. committed to a $3 billion investment in Dow Chemical to fund the Rohm & Haas purchase, may boost his investment to help the companies complete the acquisition.

The termination of the Kuwait deal prompted Standard & Poor’s last week to reduce Dow Chemical’s rating to BBB from A-. Moody’s Investors Service reduced Dow’s rating one grade to Baa1 from A3, the seventh-highest investment grade, and kept the company under review for possible further reductions.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: January 5, 2009 16:56 EST