Kuwait gov’t cancels megadeal with Dow
Güncelleme Tarihi:
Reuters
Oluşturulma Tarihi: Aralık 30, 2008 00:00
KUWAIT - Kuwait decided on Sunday to scrap a deal to form a $17.4 billion petrochemical joint venture with Dow Chemical, potentially upsetting the largest U.S. chemicals company's plans to buy rival Rohm&Haas.
The cancellation of the deal, which had met opposition in Kuwait's parliament, was acknowledged by Dow, which 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 Rohm & Haas closes.
"It is doubtful that Dow will be able to easily raise the funds and might opt to pay a cancellation fee," an Egan-Jones Rating Co report said.
The Rohm&Haas deal carries a termination fee of $750 million for Dow, according to a Securities and Exchange Commission filing in September.
Dow agreed to buy Rohm&Haas for $15.3 billion in July in a move to broaden its specialty product offerings.
In a separate statement, Rohm&Haas said completion of Dow's joint venture was not a condition for the closing of its takeover. It said it continued to work diligently to complete its deal in early 2009.
Joint venture
Earlier this month Kuwait's State-run Petrochemical Industries signed a deal 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.
The country's Supreme Petroleum Council, at a meeting headed by Prime Minister Sheikh Nasser al-Mohammad al-Sabah, "arrived at the decision to cancel the contract," state news agency KUNA said.
Kuwait and Dow had 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.
"It is doubtful that Dow will be able to easily raise the funds and might opt to pay a cancellation fee," an Egan-Jones Rating Co report said.
The Rohm&Haas deal carries a termination fee of $750 million for Dow, according to a Securities and Exchange Commission filing in September.
Dow agreed to buy Rohm&Haas for $15.3 billion in July in a move to broaden its specialty product offerings.
In a separate statement, Rohm&Haas said completion of Dow's joint venture was not a condition for the closing of its takeover. It said it continued to work diligently to complete its deal in early 2009.
Joint venture
Earlier this month Kuwait's State-run Petrochemical Industries signed a deal 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.
The country's Supreme Petroleum Council, at a meeting headed by Prime Minister Sheikh Nasser al-Mohammad al-Sabah, "arrived at the decision to cancel the contract," state news agency KUNA said.
Kuwait and Dow had 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.