30 Dec 2008

Kuwait cancels $US17b deal with Dow

9:17 am on 30 December 2008

Kuwait has scrapped a deal to form a $US17.4 billion petrochemical joint venture with Dow Chemical.

The cancellation of the deal was acknowledged by Dow on Sunday. Dow had planned to use the proceeds to repay a large part of a debt of $US13 billion it is borrowing to buy a rival company, Rohm & Haas.

Dow agreed to buy Rohm & Haas for $US15.3 billion in July. According to a Securities and Exchange Commission filing in September the deal carries a termination fee of $US750 million for Dow.

Earlier this month, Petrochemical Industries Co, a State-run company in Kuwait, signed a deal with Dow to launch the joint venture, K-Dow Petrochemicals, and was due to pay $US7.5 billion.

The deal was part of a strategy by Dow to reduce its exposure to the cyclical nature of the commodity chemicals business.

However, some Kuwaiti parliamentarians were opposed to the project in light of the global financial crisis and slumping petrochemical sales.

Parliament has a history of challenging the government: MPs have also opposed building a new refinery. Final contracts for the $US15 billion Al-Zour project have not yet been signed despite an announcement in May.