UpdateUS Dow to spend $2.16bn K-Dow settlement on debt, growth

24 May 2012 16:57  [Source: ICIS news]

(adds further detail in paragraphs 1-7, 9, 12, and 14-15)

Flags fly at an entrance to Dow Chemical in Midland, MichiganHOUSTON (ICIS)--Dow Chemical plans to spend its $2.16bn (€1.73bn) settlement in the K-Dow dispute on debt, growth and shareholders and not on any major mergers and acquisitions (M&A), the US-based major said on Thursday.

Dow has repeatedly stated that it intended to spend cash on such goals in past conference calls.

"Our priorities will remain consistent with what we have said. We will use that cash to continue to pay down debt, we'll use that cash to continue to look at rewarding shareholders and to continue to fund organic growth," said Bill Weideman, Dow chief financial officer, who was speaking about the company's general strategy for spending cash.

Weideman made his comments during the Goldman Sachs Basic Materials Conference, held on Wednesday.

"We do not plan to do any major acquisitions over the next 12 to 18 months," Weideman said. "We have so many innovation opportunities, so many growth opportunities within Dow, we don't see anything better outside of Dow."

The company's chief executive, Andrew Liveris, made similar comments during an earnings conference call held in early February.

Already this year, Dow has increased its dividend by 28% to 32 cents/share.

Earlier on Thursday, Dow Chemical said it had been awarded $2.16bn by a court of arbitration relating to the collapse of its planned K-Dow venture with Kuwait’s Petrochemical Industries Corp (PIC).

The failed K-Dow joint venture dates to December 2007, when Dow and PIC announced the agreement to create the company.

To form the joint venture, PIC would have paid $9.5bn for a 50% share in five of Dow's global businesses, worth approximately $19bn.

The agreement would have seen substantially all of the Dow-owned, former Union Carbide polyethylene (PE) business and some of Dow’s cracker capacity put into the new company.

Dow intended to use the proceeds from the K-Dow deal to help fund its $18.8bn acquisition of Rohm and Haas.

However, Kuwait ruled in December 2008, at the height of the global financial crisis, that PIC should withdraw from the planned olefins and polyethylene joint venture.

Following the collapse of the K-Dow deal, Dow missed a deadline to close on the Rohm and Haas acquisition, which later resulted in a lawsuit.

Ultimately, Dow resolved the lawsuit with Rohm and Haas, and the merger closed on 1 April 2009. By that time, however, Dow had lowered its dividend to 15 cents from 42 cents.

Meanwhile, Dow and PIC had agreed to resolve their contractual disputes through the International Chamber of Commerce's (ICC) International Court of Arbitration.

“This outcome brings resolution and closure to the issue,” Liveris said in a statement. "We remain focused on continuing to move forward with our transformation and profitable business partnerships – both in Kuwait and around the world.”

Dow said its partnership with Kuwait remains strong and will continue to benefit both parties. It includes the Kuwait-based ethylene, PE and ethylene glycol joint venture Equate and the ethylene glycol joint venture MEGlobal. Kuwait’s Petrochemical Industries Company (PIC) is a partner in both these ventures.

($1 = €0.80)

By: Al Greenwood
+1 713 525 2645

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