Washington: US chemicals giant Dow Chemical was under pressure on Wall Street on Tuesday after Kuwait scrapped a $17.4-billion deal to create a petrochemicals joint venture.
Analysts said the pullout, announced on Sunday by the Kuwaiti government amid the global financial crisis and a decline in oil prices, could jeopardize financing of Dow’s agreed $18.8 billion acquisition of Rohm and Haas, a US specialty materials firm.
Shares in Dow plunged 17.58% to $15.10 in late morning New York trade, while Rohm and Haas tumbled 21.41% to $49.95.
The Kuwait government said on Sunday it was canceling an agreement, signed last month, for Kuwait state-owned Petrochemicals Industries Co. (PIC) to pay $7.5 billion for a stake in a 50-50 joint venture with Dow Chemical to be called K-Dow Petrochemicals.
Under the agreement, the Dow Chemical Company would have contributed assets including plants and research center in several countries.
The government was forced to scuttle the deal in the face of opposition from Kuwaiti lawmakers who alleged the value of those assets had plummeted due to the global financial crisis.
Dow said it was “extremely disappointed” by the Kuwaiti government’s decision and was evaluating its options under the joint-venture agreement but remained committed to its Middle East strategy.
If the deal had not been scrapped before 1January, when it was due to become effective, Kuwait would have been liable to pay a penalty of up to $2.5 billion.