Dow to Take Action Against Kuwait on Halted Venture

By Jack Kaskey

Jan. 6 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, plans to pursue legal options against Kuwait for canceling a joint venture agreement and will seek a new partner to invest in its basic-plastics business.

Other parties have approached Dow about acquiring an interest in the unit, the world’s largest maker of polyethylene plastic, Midland, Michigan-based Dow said today in an e-mailed statement. Dow said it will establish a formal process for securing a new venture and didn’t name the interested parties.

Chief Executive Officer Andrew Liveris is trying to salvage his plan to gain access to low-cost raw materials and add more- profitable product lines after Kuwait last month canceled the venture, depriving Dow of cash it planned to use to acquire Rohm & Haas Co.

“We were shocked by this news, and this was completely unexpected given the approvals already received and the behavior, actions and words from our partners,” Liveris, 54, said in the statement.

Dow agreed in July to buy Rohm & Haas for $15.4 billion and assume $3.4 billion of debt.

Philadelphia-based Rohm & Haas fell 94 cents, or 1.5 percent, to $63.82 yesterday 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.

Standard & Poor’s and Moody’s Investors Service both downgraded Dow on Dec. 29 after the Kuwait deal collapsed. Dow would have gotten about $7 billion after taxes from Kuwait’s investment.

Buffett Investment

Dow had also planned to use a $13 billion bridge loan, a $3 billion equity investment by Warren Buffett’s Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority to pay for Rohm & Haas. Dow needed only about $5 billion of the bridge loan with the Kuwait proceeds, Chief Financial Officer Geoffery Merszei said in October.

Kuwait’s state-owned Petrochemical Industries Co. was to buy a 50 percent stake in Dow plants and technology used to make commodity plastics and other products.

Dow said today it still is prepared to complete the venture with Kuwait immediately.

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