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IN THE NEWS
Kuwait Parts Ways with Dow Chemical Co.
2008-12-29 | 08:15
Plans for JV ended after Kuwaiti government balks.
Kuwait said Sunday it is terminating plans for its $17.4 billion dollar joint venture with Dow Chemical Co. amid political opposition. Dow confirmed reports of the cancellation, saying its partners in the deal verbally informed it of the decision by Kuwait's top energy body, the Supreme Petroleum Council.
The JV, known as K Dow, would have funded Dow Chemical's acquisition of Rohm & Haas Co, according to reports.
"Dow is extremely disappointed with the decision by the Kuwait Government, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement," the Midland, Mich., company said in a statement. "While disappointed in this outcome, Dow remains committed to its Middle East Strategy."
Forming K-Dow was a key part of Chief Executive Officer Andrew Liveris' plan to reduce Dow's reliance on commodity products and gain access to lower-cost petroleum, used to make chemicals, according to a Bloomberg News report.
The cancellation followed sharp criticism by Kuwaiti lawmakers, especially after disclosures that commissions worth $850 million were assigned to certain groups that supported the deal, according to an article in the Kuwait Times published Sunday prior to the council's decision. Officials said they expected senior members of the Ministry of Oil to be referred to prosecutors if the deal was approved, the Kuwait Times said.
The Bloomberg report said some Kuwaiti members of parliament also considered the investment to be too large at a time of falling oil prices and saw the plan as "overpriced."
Kuwait's state-run Petrochemical Industries Co. signed the K-Dow deal last month, agreeing to pay $7.5 billion to form the joint venture. If Kuwait had canceled the agreement after the start of the New Year, it would have been liable to pay a penalty of up to $2.5 billion, according to a Reuters report.
