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Kuwait wants Dow to rework takeover
The Kuwait Investment Authority (KIA) would consider increasing its support for Dow Chemical's disputed takeover of Rohm and Haas if the terms of the deal were changed to account for the downturn, a person familiar with the matter said.
- By Henny Sender and Francesco Guerrera, Financial Times
- Published: 23:04 February 10, 2009
New York The Kuwait Investment Authority (KIA) would consider increasing its support for Dow Chemical's disputed takeover of Rohm and Haas if the terms of the deal were changed to account for the downturn, a person familiar with the matter said.
Dow failed to complete the $15 billion deal after the collapse of a joint venture between Dow and PIC - an arm of the Kuwaiti Petroleum Corporation - that was supposed to contribute $7.5 billion to help pay for the acquisition. Warren Buffett has agreed to contribute $3 billion and the KIA was to have added $1 billion.
According to a person with direct knowledge of the matter, the KIA would consider putting up more money, if there were new terms.
"Today, it is very difficult to complete this deal on the old terms," this person added. "There would have to be a new price and new terms. The environment has changed so much and chemical companies are losing so much money."
Rohm and Haas underlined the brutal conditions faced by the sector, reporting an 81 per cent fall in fourth quarter earningsfrom continuing operations.
The figures make it harder for Dow to justify paying its original price for the company. Rohm shares fell more than one per cent to $55.70 at midday in New York, well below the $78 per share Dow agreed to pay last year.
The KIA has not approached Dow to discuss increasing its investment in the deal, Dow said. It is also highly unlikely that KIA on its own would put in anything like the $7-8 billion Dow would need to close the Rohm deal. However, an increased investment by the KIA strikes many analysts as an elegant solution to the break-up of the Dow-PIC joint venture.
"There is a concern as to Kuwait's reputation for direct foreign investment," Ahmad Barakat, managing partner with Al Sarraf and Al Ruwayeh in Kuwait City who is not directly involved in the matter, said.
"KIA could salvage that reputation."
Initial talks between the Kuwaitis and Dow began in 2007. InNovember 2008, the deal was renegotiated to reduce the Kuwaiti contribution to $7.5 billion from $9 billion in recognition of the deterioration in the economy.
Even the revised terms, however, met with criticism in the Kuwaiti parliament, where questions were raised about price tag and a $2.5 billion break-up fee.
Dow has until July to take advantage of its one-year bridge loan for the deal. It reported a $1.55 billion fourth quarter loss.
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