Dow Chemical Company, the largest US chemical maker, plans to seek more than $2.5 billion (Dh9.18bn) from Kuwait for cancelling a joint venture agreement and will consider a new partner to invest in its basic-plastics business.
Two other parties have approached Dow about acquiring an interest in the unit, the world's largest maker of polyethylene plastic, CEO Andrew Liveris said. Liveris said he expects at least six potential partners to bid, and a new deal should be announced this year.
Representatives of Kuwait's state-owned Petrochemical Industries Company, which was to buy a 50 per cent stake in Dow's commodity plastics unit, didn't show up to sign closing documents at a New York law firm on January 2, Liveris said.
The venture would have paid each partner $1.5bn, boosting Dow's proceeds to $9bn and reducing Kuwait's net cost to $6bn.
According to 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 transformational strategy that has been Dow's roadmap for future growth and profitability. "We were shocked at what happened in Kuwait," Liveris said. "The political process overtook the approval process."
Dow said it will seek damages from Kuwait in court and in the International Chamber of Commerce in London, as specified in the cancelled agreement. Damages aren't limited to the $2.5bn termination fee, Liveris said. "We are seeking multiple billions of dollars in remedy, and we will pursue all legal options to get that," he said in the interview.
"That's what I consider the minimum of what we should do in this situation. There is a breach of a commercial contract." Petrochemical Industries Chairman Maha Mulla Hussein said Kuwait is not in breach of its contract with Dow.
Kuwait cancelled the venture on December 28 after the government came under pressure from opposition lawmakers to scrap the deal, which, they said, was overpriced amid falling oil prices.
Some members of parliament threatened to publicly question Prime Minister Sheikh Nasser Al Mohammed Al Sabah, a nephew of Emir Sheikh Sabah Al Ahmed Al Sabah, Kuwait's Ruler.
Liveris is trying to salvage plans to gain access to low- cost raw materials and add more profitable product lines after Kuwait cancelled the venture last month, depriving Dow of cash it planned to use to acquire chemical maker Rohm & Haas Co. The new partnership and the sale of some commodity units will raise at least $7.5bn, the amount Kuwait was to pay, Liveris said. (With inputs from agencies)