Dow Seeks Legal Recourse Against Kuwaiti Firm

Midland, MI, Jan. 6, 2009--Dow Chemical Co. will pursue legal action against a state-owned Kuwaiti company that pulled out of a joint venture agreement last week, according to filings with the Securities and Exchange Commission.

The company also said that it is considering similar deals with other investors.

Dow could potentially recoup $2.5 billion from Petrochemical Industries Co. after it backed away from the K-Dow Petrochemicals agreement, the SEC documents said.

Dow said it will continue to pay its regular quarterly cash dividend, which it has done since 1912, and accelerate cost cuts in 2009.

Kuwait pulled out of the deal following weeks of internal political pressure. Dow had expected to get more than $7 billion in cash from the transaction, some of which would have helped pay for its $15.3 billion buyout of Philadelphia-based Rohm & Haas Co.

Dow must close that deal by Saturday, or the $78-per-share price will begin to increase immediately under the terms of the agreement.

"Pursuing legal options is not a decision we take lightly ... but (Petrochemical Industries) is in breach of contract, and we must take action to protect the interests of our company and our shareholders," Liveris said in a statement.

Dow has seven Middle Eastern operations, five of which are joint ventures.

The company is in the planning stages for a massive chemicals and plastics production complex in Ras Tanura, Saudi Arabia -- a plant that's expected to be among the world's largest petrochemical facilities.

Kuwait has struggled recently to develop and diversify an economy overwhelmingly reliant on oil. Its government routinely changes hands, and Parliament members have been known to take the prime minister to task over allegations of corruption and mismanagement.

Kuwait pulled in less than $200 million in foreign direct investment in 2007, even though it has slashed high taxes on foreign firms -- compared to $24 billion for Saudi Arabia, according to the United Nations Conference on Trade and Development.

Shares of Dow Chemical Co. rose 4.6 percent, or 69 cents to $15.74 in premarket trading. The stock has traded between $43.43 and $15.01 in the past 52 weeks.