Why ownership shift isn't so bad for Phila.
July 11, 2008
Maria Panaritis, Philadelphia Inquirer
The news was shocking - and not just because it had been kept so secret. At first, it provoked the kind of gut-level grief one might feel if, say, the statue of William Penn atop City Hall had just been bought by a town in another state.
Rohm & Haas Co., a century-old homegrown stalwart that had survived two World Wars, the decline of manufacturing, and even the city's notorious tax structure to remain one of the heaviest hitters to still call Philadelphia its headquarters, was being bought by Dow Chemical Co.
The deal would remove local control from one of the region's most enduring and philanthropic Main Line names - the Haas family - and turn over the fabled chemical company to corporate chieftains in a place called Midland, Mich. Going price: $15 billion in cash for a legacy that had lasted four generations.
Rohm & Haas long ago outlived such fellow icons as Breyer's, Conrail and the Philadelphia Naval Shipyard, to name a few that have come and gone like lost lovers. The gut reaction: Another Philadelphia big gun bites the bragging-rights dust.
As details emerged, though, even longtime critics, who have blamed Philadelphia's tax policies for repelling corporations, urged optimism.
Sure, Philadelphia adds another native company to the growing list whose headquarters have shifted to other states or continents after being gobbled up by more ravenous corporate breeds. But Dow and Rohm & Haas appeared to be joining forces to grow. This was not a maneuver to squelch a rival in a quest for monopolistic dominance of market share.
"On the list of headquarters cities, we may lose one on that," said Steven Wray, executive director of the Economy League of Greater Philadelphia. "But we're not losing the company, we're not losing the talent, we're not losing the products."
"This wasn't about taking out a competitor," Wray added. "This was about looking for synergies and opportunities to grow."
Rohm & Haas said it would retain its name and corporate headquarters office near Independence Mall - even if executives report to bigwigs in Michigan.
More important, Dow is expanding into an area of high-profit specialty chemicals that Rohm & Haas is known for.
"The fact that you're getting bought out does not mean that you are unsuccessful," said Pavel Savor, assistant professor of finance at Wharton.
Dow must think good days are ahead: It is paying $78 a share, even though Rohm & Haas stock was worth just $44.83 the day before the deal, Savor said. "I guess they see continued growth in the markets that Rohm & Haas is involved in."
Few expect Dow to whack away at Rohm & Haas' blue-chip staff of scientists, business managers, and engineers, though the Economy League's Wray noted that it was "too soon to tell" how things would play out.
The company employs 3,100 workers in the region. The place most likely to take a staffing hit is Center City, where some Rohm & Haas managers will be seen as duplicating the work of Dow managers in Michigan.
Mayor Nutter has requested a meeting with Rohm & Haas. The message: "We're here, we're aware, we'll do everything we can, and we want to be a good partner to you," said Andrew Altman, deputy mayor for economic development and planning. The goal: preserve jobs.
There is also symbolic meaning to the changeover. Philadelphia is the birthplace of the U.S. chemical industry, said Arnold Thackray, chancellor of the Chemical Heritage Foundation here. "The first professor of chemistry in the Americas was in Philadelphia in 1763," said Thackray, "and everything spreads out from that moment."
Thackray, whose nonprofit was launched with support from the Haas family and who is a friend to patriarch John Haas, likened the Dow deal to a "wakeup call" for local elected officials.
"If you look at this in historical perspective, Philadelphia has seen the start of many, many significant ventures," he said. "Philadelphia has not had a good track record in maintaining and developing those ventures for the long term."
Even Thackray noted, though, that acquisitions seem inevitable. In 1999, Rohm & Haas swooped into Chicago and snapped up that city's landmark salt company, Morton International - "a long-hallowed company."
Yesterday's deal? "The luck of the draw," he said.
While headquarters are considered important to a city's economy - executives are often among a region's most active philanthropists - the reality is that globalization has scattered corporate operations.
"At the end of the day," said Altman, "what we need in Philadelphia is to promote job growth."