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December 29, 2008 3:21 PM

Dow Chemical's Deal with a Kuwaiti Petrochemical Company Blows Up

Posted by Ross Todd

Even once-steady petrochemical deals seem combustible in the current economic downturn. On Sunday, Kuwait's government announced its decision to cancel a joint venture deal with The Dow Chemical Company. The $17.4 billion joint venture between Midland, Mich.-based Dow Chemical and Petrochemical Industries Company (PIC), a wholly owned subsidiary of Kuwait Petroleum Corporation, was set to take effect Thursday.

Partner Louise Eccleston led a team from Ashurst working on the joint venture for PIC. She had not returned a call for comment at the time of this post. A spokesman for the firm would neither confirm nor deny that Ashurst had advised PIC on the decision to cancel the joint venture.

Dow Chemical released a statement Sunday saying the company was "extremely disappointed with [PIC's] decision, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement." A team from Shearman & Sterling represented the company in the joint venture. Reached at his office this morning Shearman partner John Marzulli, Jr., said he was not at liberty to speak on behalf of his client.

According to this Bloomberg story, the collapse of the Kuwait deal raises questions about the prospects of another Dow venture: the company's planned $15.4 billion purchase of Philadelphia-based plastics and adhesives manufacturer Rohm & Haas Company. Dow was expected to use some $9 billion from PIC  to help fund the Rohm & Haas acquisition.

Shearman represented Dow and Wachtell, Lipton, Rosen & Katz represented Rohm & Haas in the deal, which was announced in July. Rohm and Haas issued a statement Sunday saying Dow's joint venture "is not a closing condition for the proposed merger" and that the company "continues to work diligently towards completing the proposed transaction with Dow in early 2009."

Those reassurances notwithstanding, shares of both Dow and Rohm & Haas fell sharply in trading on Monday, Bloomberg reported.

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