Processing Magazine

Kuwait cancels $17 billion deal with Dow Chemical

December 29, 2008

Reuters reports that Kuwait has decided to scrap a deal to form a $17.4 billion petrochemical joint venture with Dow Chemical. The cancellation of the deal, which had met opposition in Kuwait''s parliament, was acknowledged by Dow and is a blow to the company. Dow had planned to use the proceeds to repay a large part of $13 billion in debt it will have to shoulder once its acquisition of rival Rohm & Haas closes, which is expected to be in early 2009. The Supreme Petroleum Council, at a meeting headed by Prime Minister Sheikh Nasser al-Mohammad al-Sabah made the decision to cancel the contract. State-run Petrochemical Industries Co (PIC) signed a deal earlier this month with Dow to launch the joint venture, K-Dow Petrochemicals, and was due to pay $7.5 billion. The deal was part of Dow''s strategy to reduce its exposure to the cyclical nature of the commodity chemicals business. Dow has not clarified whether the deal''s collapse will affect its plans to acquire Rohm & Haas. Dow and other chemical makers around the globe face one of the worst slumps ever in chemical demand, due to recessions in most developed countries and a sharp slowdown in emerging economies. Kuwait and Dow lowered the value of the joint venture more than 8 percent to $17.4 billion earlier this month after the Gulf Arab state asked to cut its contribution in light of a sharp slowdown in global demand. The new company had been due to market petrochemicals and plastics such as polyethylene, polypropylene and polycarbonate, used in products ranging from plastic bottles and compact disks to computers and agricultural compounds.