Dow Chemical Considers Legal Options Against Kuwait
JANUARY 6, 2009, 9:17 A.M. ET
By KEVIN KINGSBURY
online.wsj.com
Dow Chemical Co. said it will pursue "legal options" against Kuwait following the country's pullout of a multibillion-dollar joint-venture that was a cornerstone of Dow's effort to transform itself.
The company is pushing to move from its roots as a staid chemical maker to a fast-growth firm with an "asset light" strategy of selling units and pursuing joint ventures while building new facilities in parts of the world where oil and gas costs are lower.
The decision by Kuwait's top petroleum-policy council to pull out of the deal potentially complicates Dow's efforts to complete a $15.3 billion acquisition of Rohm & Haas Co. That deal is seen as helping Dow get into businesses with higher margins and steadier earnings.
Chairman and Chief Executive Andrew Liveris said Tuesday, "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." As such, he called Petrochemical Industries Co. in breach of contract and said the company will pursue its "legal options."
Mr. Liveris wasn't specific in a statement, and a Dow spokesman wasn't immediately available to comment. But the company said it is ready to close on the deal "immediately."
Despite the woes with the Kuwait deal, Mr. Liveris said the company will continue pursuing other partnerships. He noted Dow has been in discussions regarding some of the operations that were slated to be part of the Kuwait deal, such as the basic plastics business.
Dow contended that a new joint-venture partner for that segment, along with the acceleration of planned divestitures and making additional sales, "will yield proceeds greater" than what the company expected to get from the Kuwait deal. Under new terms announced last month, Dow was slated to receive $9 billion in pretax proceeds.
The scuttled deal came as Dow and other chemical makers are faced with slumping demand as global economic activity slows markedly. The company announced last month it would cut about 5,000 full-time jobs, or 11% of its workforce, close 20 facilities and sell several non-strategic businesses as the firm looks to speed its restructuring and reduce costs.
Mr. Liveris said Tuesday Dow "will accelerate these actions even faster and more aggressively in 2009" as it pushes to maintain its "strong" investment-grade credit rating. At the same time, the company doesn't plan to cut or suspend it dividend as a cash-saving move. Dow has paid one each quarter since 1912.
Dow shares were up 1% premarket at $15.12. The stock is down 59% the past year.
Write to Kevin Kingsbury at kevin.kingsbury@dowjones.com
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