For Dow Chemical Co., 2009 is beginning as badly as 2008 ended.
The firm's planned acquisition of Rohm and Haas Co. is heading to court and now Dow is defending itself against allegations that it bribed Kuwaiti officials in order to complete a joint venture.
Rohm and Haas, a Philadelphia-based specialty chemicals maker, filed a lawsuit Jan. 27 against Dow in Delaware Chancery Court in Wilmington, Del., asking that Dow be required to complete the $15.4 billion transaction. Chancellor William Chandler has scheduled the trial to begin March 9.
Officials with Midland, Mich.-based Dow a major producer of commodity and specialty plastics said Jan. 26 that the deal would not close by its original Jan. 27 completion date. Dow officials cited ``unacceptable uncertainties on the funding and economics of the combined enterprise'' as a reason for the delay.
``Our long-term strategy remains unchanged and the proposed acquisition of Rohm and Haas is consistent with this strategy,'' Dow Chairman and Chief Executive Officer Andrew Liveris said in a Jan. 26 news release.
Liveris said later that day in a CNBC TV interview that combining the two firms in the current market environment would be ``an economic disaster.''
In a release that same day, Rohm and Haas officials said the firm ``intends to pursue all available alternatives to protect its shareholders' interests.'' The Federal Trade Commission approved the deal Jan. 23.
Dow's financial condition has been hurt by the global economic recession and the unexpected failure of a commodity plastics joint venture planned with Petrochemical Industries Co. of Kuwait. PIC pulled out of that deal in late December, leaving Dow without $7.5 billion it would have received in the transaction. Dow was expected to use part of that payment to fund the Rohm and Haas purchase.
Dow is seeking to recoup a $2.5 billion breakup fee from PIC. Dow also is seeking a new partner in the joint venture. Saudi Basic Industries Corp. (Sabic) has been mentioned by industry sources as a possible PIC replacement.
The bribery allegations against Dow surfaced Jan. 29, when the Kuwaiti parliament voted to investigate ``suspicions of profiteering and accepting all forms of commissions by oil executives'' in several deals, including the Dow joint venture.
``We have very strong suspicions that commissions have been taken in the Dow deal,'' said Kuwaiti parliament member Musallam Al-Barrak, in a Jan. 28 story in the Kuwait Times.
Dow responded in a Jan. 28 statement by saying the firm ``is highly offended about any suggestion of improper actions.''
``The contact between Dow Chemical and Petrochemical Industries Co. was entirely appropriate, as was Dow's conduct,'' Dow officials said.
Market watchers have speculated that Dow will attempt to negotiate a price lower than the $78 per share it offered for Rohm and Haas when the deal was announced last year.
That price represents a 32 percent premium over the $59 price of Rohm and Haas in early trading Jan. 27. Word of the delay had sent the price tumbling from almost $66 to just above $57 on Jan. 26.
A Jan. 27 Associated Press story reported that Liveris said the firm's quarterly dividend may experience ``a cut.''
But it's unclear if Liveris meant the dividend would be reduced or eliminated, and Dow officials could not be reached to clarify the statement. Dow has paid a dividend every quarter for the past 96 years.
The global slowdown prompted Dow in early December to announce it would eliminate 5,000 full-time jobs and 6,000 contractor positions, while closing 20 plants and temporarily idling 180 more.
The company's per-share stock price has tumbled from $35 in mid-September to $12.30 in early trading Jan. 30.