MIDLAND, MI - The Dow Chemical Co. has announced a wide range of legal, operational and financial actions that will keep the company on track to fulfill the transformational corporate strategy Dow has pursued since 2005.
Dow's strategy will continue to involve aggressive steps to establish Dow as a high-performance, earnings-growth company organized around a strong portfolio of joint ventures and market-facing performance business divisions. Central to Dow's strategy is its commitment to retain a strong investment-grade rating and to maximize shareholder return.
According to Dow Chairman and CEO Andrew Liveris, the recent decision by Dow's partners in Kuwait to abandon the terms of its joint venture formation agreement (JVFA) will not deter the company from pursuing the strategy that has been Dow's roadmap for future growth and profitability.
"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. It is certainly true that the actions in Kuwait have accelerated the need for decisive action, but our strategy remains as relevant as ever and will drive the choices we make to become a company that will thrive in the changing markets of the 21st century."
On Dec. 31, 2008, Dow received official written notice from Petrochemical Industries Co. (PIC) of Kuwait that the closing must be postponed because the Kuwaiti Supreme Petroleum Council withdrew its earlier approval of the transaction. As a result, Dow has said it will seek to enforce its rights under the terms of the various agreements and the JVFA executed by Dow and PIC since the joint venture partnership was first announced in December 2007.
"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 one of K-Dow Petrochemicals on January 2," said Liveris. "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."
Although Dow is prepared to close K-Dow immediately if PIC does indeed cure the breach of contract, the company has already been approached by other interested parties about joint venturing with Dow for the basic plastics businesses. As a result, Dow has also announced it will establish a formal process to secure a joint venture partner to accomplish the goals of its asset light strategy. The core businesses involved in the K-Dow joint venture include strong Dow franchise businesses, among them the largest and strongest producer of polyethylene in the world.
"Prior to signing the definitive agreement with our Kuwaiti partners about the K-Dow joint venture, we had other options and partners to consider," Liveris said. "Some of these discussions were active as recently as November, and we have already been contacted by other interested parties and have begun discussions. This can be done on an accelerated timeline due to the considerable groundwork that has already been established in anticipation of the K-Dow joint venture."