By Frank Esposito, Plastics News
Midland, Michigan -- Kuwaiti officials pulled the plug on a much-anticipated plastics-related joint venture with Dow Chemical Co., just days before the JV was to open its doors.
A group of Kuwaiti opposition lawmakers convinced Prime Minister Sheikh Nasser al-Mohammed al-Sabah to kill the JV, saying it was no longer viable given the global economic downturn.
The joint venture, dubbed K-Dow, was going to be based in Michigan and include Dow's manufacturing and marketing assets for some plastics materials, including polyethylene, polypropylene, and polycarbonate. The joint venture fit into Dow's "asset light" strategy, to team up with Kuwait's Petrochemicals Industries Co. (PIC) to cut its raw material costs in order to reduce the cyclic nature of the business and increase profitability.
News of the pullout was surprising to some market watchers, especially since the deal was revised in November in a move that favored Kuwait and reduced its value to Dow by as much as $2 billion. On 24 Dec, Dow chairman and chief executive Oofficer Andrew Liveris had issued a lengthy statement defending the deal and explaining why it would be a good thing for Kuwait.
The pullout also could have an impact on Dow's pending acquisition of specialty chemicals firm Rohm and Haas Co. of Philadelphia for almost $19 billion. Dow was expected to use some of the proceeds from the K-Dow transaction to fund the Rohm and Haas deal.
Dow officials could not be reached for comment on the pullout or its potential impacts - including the possibility of Dow filing an arbitration claim of as much as $2.5 billion, as outlined in a recent Securities and Exchange Commission filing.
Rohm and Haas officials said in a 28 Dec news release that the formation of K-Dow "is not a closing condition" for the Dow acquisition.
"Rohm and Haas Co. continues to work diligently towards completing the proposed transaction with Dow in early 2009," officials said. Wall Street, however, was not convinced, sending Rohm and Haas' per-share stock price down 16 percent to $53.50 in late trading 29 Dec.
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