Dow Chemical Plans Legal Action Against Kuwaiti Group

Dow Chemical said on Jan. 6 it was preparing legal action against Kuwait's state-owned Petrochemicals Industries Co. for "breach of contract," for pulling out of a multibillion-dollar project. "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," said Dow CEO Andrew Liveris.

The Kuwaiti group last month scrapped a $17.4 billion deal to create a petrochemicals joint venture.

Dow said it "will seek to enforce its rights under the terms of the various agreements" since the joint venture partnership was first announced in December 2007. Under the deal, PIC was to pay $7.5 billion to form a petrochemicals firm known as K-Dow.

Several opposition Kuwaiti lawmakers had threatened to quiz the prime minister in parliament if the deal was not scrapped before January 1 when it was due to become effective. The cancellation of the agreement after the start of the New Year would have made Kuwait liable to pay a penalty of up to $2.5 billion, according to Kuwaiti officials.

Liveris said, "We were shocked by this news, and this was completely unexpected given the approvals already received and the behavior, actions and words from our partners. We have over 1,500 documents prepared for closing for what we believed to be Day 1 of K-Dow Petrochemicals on January 2."

The firm said it "is prepared to close K-Dow immediately if PIC does indeed cure the breach of contract," but also has been approached "by other interested parties about joint venturing with Dow for the basic plastics businesses."

"While the events of the past week have been extremely disappointing and completely unexpected given where we were in the approval process, Dow is and will continue to be a strong, globally diverse company with a wide range of options available to us for delivering on our strategy," Liveris said.