Kuwait cancels $17.4 bln deal with Dow Chemicals

The cancellation of the deal, which had met opposition in Kuwait's parliament, was acknowledged Sunday by Dow and is a blow to the largest U.S. chemicals company. Dow had planned to use the proceeds to repay a large part of the $13 billion of debt it will have to shoulder once its acquisition of rival Rohm & Haas closes, which is expected to be in early 2009.

Kuwait’s Cabinet “decided to cancel the contract and asked all concerned authorities to take the necessary measures to implement this decision,” KUNA, the state news agency, reported from Kuwait today, citing a Cabinet statement.

Dow said in a statement Sunday, it was "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, Michigan-based company added that it "remains committed to its Middle East Strategy".

The deal would have been the latest between a major U.S. company and Middle East investors. General Electric and Abu Dhabi investment agency Mubadala Development Co formed an $8 billion joint venture in July to provide commercial finance in the Middle East and Africa.

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.

Earlier this month, Dow said it would close 20 facilities, divest several businesses and cut 5,000 jobs, or 11 percent, of its workforce. It also plans to temporarily idle about 180 plants.

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.�

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