Dow threatens legal action over Kuwaiti deal

LEGAL THREAT: Chemical giant Dow has taken legal advice on a Kuwaiti petrochemical firm's decision to withdraw from a done deal. (Getty Images)

Chemical giant Dow is looking at taking legal action against the Kuwaiti government for breaking off a multi-billion dollar petrochemical deal, it said on Tuesday.

The Dow Chemical Company is claiming that Petrochemical Industries Company (PIC), which is a wholly owned subsidiary of Kuwait Petroleum Corporation, is in breach of their contract terms.

The deal involved the two firms forming a 50:50 venture believed to be worth around $11 billion.

Andrew Liveris, chairman and CEO of Dow, the largest chemicals maker in the US, said the company had been "shocked" by PIC's decision on Dec. 31 to postpone the deal, just two days ahead of the joint venture's expected start date.

In a written statement sent to Dow, PIC said it could not go through with the deal because the Kuwaiti Supreme Petroleum Council had withdrawn its earlier approval of the transaction.

Dow is now looking to enforce its rights under the terms of the various agreements and the Joint Venture Formation Agreement made between the two companies since the deal was struck in December 2007.

"This was completely unexpected given the approvals already received and the behavior, actions and words from our partners,” Liveris said in a statement.

"Pursuing legal options is not a decision we take lightly, especially because of the longstanding partnerships we have established in Kuwait over the past decade, but PIC is in breach of contract, and we must take action to protect the interests of our company and our shareholders," he added.

PIC was unable comment on Tuesday afternoon.

Just last month Dow had said the agreement was solid and fair. It had over 1,500 documents prepared for closing the deal to be known as K-Dow Petrochemicals, with both companies following all the required approvals and disclosures within Kuwait, as required by law.

Other parties have approached Dow about forming a partnership in its basic-plastics business and it would establish a formal process for securing a new venture, the company said.

Over the last few years, Dow has initiated several projects in the Middle East, such as the Olefins II project in Kuwait, the Sohar project in Oman and the Ras Lanuf petrochemical joint venture in Libya.

With annual sales of $54 billion and 46,000 employees worldwide, Dow is a diversified chemical company that operates in around 160 countries.

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