US Dow may receive $2.16bn K-Dow award in 2013 – Liveris

26 July 2012 20:59  [Source: ICIS news]

HOUSTON (ICIS)--Dow Chemical could receive its $2.16bn (€1.77bn) arbitration award next year, following its dispute over the failed K-Dow joint venture with Kuwait's Petrochemical Industries Corp (PIC), the CEO of the US-based company said on Thursday.

Dow announced in May that it had been awarded the amount by a court of arbitration.

By autumn, the tribunal will reveal how much in interest and fees Dow could receive, an amount that would be in addition to the $2.16bn award, said Andrew Liveris, Dow chief executive.

Liveris made his comments during an earnings conference call.

After the tribunal releases the final award, it should take 6-9 months for the money to arrive, Liveris said.

In another update to the award, Liveris said, "Kuwait has filed an application requesting the high court to ask the tribunal to further consider these damages.

"It does not suggest, by the way, that there was no breach. In fact, it reaffirms that there was," Liveris said. "They are just asking for an examination of due process."

Such a request is not unusual, especially given the size of the award, he said.

Once Dow receives the money, it plans to spend it on debt, growth and shareholders and not on major mergers and acquisitions (M&A), Liveris said.

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.

Following the $2.16bn award, Dow has said that its partnership with Kuwait remains strong and will continue to benefit both parties. It includes the Kuwait-based ethylene, PE and ethylene glycol (EG) joint venture Equate and the EG joint venture MEGlobal.

PIC is a partner in both of these ventures.

($1 = €0.82)

By: Al Greenwood
+1 713 525 2645

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