Dubai, United Arab Emirates (UAE) - The Dow Chemical CompanyDow Chemical Company (NYSE:DOW) today announced a wide range of legal, operational and financial actions that will keep the Company on track to fulfill the transformational corporate strategy DowDow has pursued since 2005.

DowDow's strategy will continue to involve aggressive steps to establish DowDow as a high-performance, earnings growth company organized around a strong portfolio of joint ventures and market-facing performance business divisions. Central to DowDow's strategy is its commitment to retain a strong investment grade rating and to maximize shareholder return.

According to DowDow Chairman and CEO Andrew Liveris, the recent decision by DowDow's partners in Kuwait to abandon the terms of its Joint Venture Formation Agreement (JVFA) will not deter the Company from pursuing the transformational strategy that has been DowDow's roadmap for future growth and profitability.

"While the events of the past week have been extremely disappointing and completely unexpected given where we were in the approval process, DowDow is and will continue to be a strong, globally diverse company with a wide range of options available to us for delivering on our strategy. It is certainly true that the actions in Kuwait have accelerated the need for decisive action but our strategy remains as relevant as ever and will drive the choices we make to become a company that will thrive in the changing markets of the 21st century."

DowDow to Pursue Legal and Other Options to Fulfill Rights under Kuwait Agreement

On December 31, 2008, DowDow received official written notice from Petrochemical Industries Company (PIC)Petrochemical Industries Company (PIC) of Kuwait that the closing must be postponed because the Kuwaiti Supreme Petroleum Council withdrew its earlier approval of the transaction. As a result, DowDow has said it will seek to enforce its rights under the terms of the various agreements and the JVFA executed by DowDow and PICPIC since the joint venture partnership was first announced in December 2007.

"We were shocked by this news, and this was completely unexpected given the approvals already received and the behavior, actions and words from our partners. We have over 1,500 documents prepared for closing for what we believed to be Day 1 of K-Dow Petrochemicals on January 2," said Liveris. "Pursuing legal options is not a decision we take lightly, especially because of the longstanding partnerships we have established in Kuwait over the past decade, but PICPIC is in breach of contract, and we must take action to protect the interests of our company and our shareholders."

Beyond K-Dow: New Partnerships, New Opportunities

Although DowDow is prepared to close K-Dow immediately if PICPIC does indeed cure the breach of contract, the Company has already been approached by other interested parties about joint venturing with DowDow for the basic plastics businesses. As a result, DowDow has also announced it will establish a formal process to secure a joint venture partner to accomplish the goals of its asset light strategy. The core businesses involved in the K-Dow joint venture include strong DowDow franchise businesses, among them the largest and strongest producer of polyethylene in the world. Polyethylene is the world's largest thermoplastic and for the last several decades has grown well above global GDP.

"Prior to signing the definitive agreement with our Kuwaiti partners about the K-Dow joint venture, we had other options and partners to consider," Liveris said. "Some of these discussions were active as recently as November, and we have already been contacted by other interested parties and have begun discussions. This can be done on an accelerated timeline due to the considerable groundwork that has already been established in anticipation of the K-Dow joint venture."

DowDow believes that the identification of an alternative joint venture partner for DowDow's basic plastics business combined with the acceleration of planned divestitures and several additional divestments that are consistent with the Company's strategy will yield proceeds greater than the funds DowDow expected to receive in connection with the K-Dow joint venture.

Remaining Responsive to a Volatile Global Economic Environment

While the status of the K-Dow joint venture has created an unexpected hurdle for DowDow's corporate strategy, the Company has a long history of responding quickly and aggressively to the rapidly changing external events that are characteristic of the global economy in the 21st century.

Indeed, many of the elements of the transformational strategy DowDow has pursued since 2005 were created in response to the rapidly changing global environment. For example, extreme fluctuations in hydrocarbon prices in the US and other parts of the world led to the development of DowDow's "asset light" strategy which has sought to develop new facilities in parts of the world where hydrocarbon costs are lower and more consistently predictable.

Earlier in 2008, with petroleum costs at an all-time high, DowDow again responded aggressively with company-wide price increases that reinforced DowDow's commitment to assuring financial performance despite rapidly changing external factors.

"In this volatile economic environment, the marketplace will reward companies committed to becoming leaner, more agile and more responsive to both challenges and opportunities," Liveris said. "DowDow will be precisely this kind of company, and we intend to emerge from the current economic climate a more formidable competitor, better able to meet the considerable opportunities of this century."

Commitment to Financial Discipline and Maintaining Strong Investment Grade Credit Ratings

Since the onset of the global financial crisis in September 2008, DowDow has taken aggressive actions to reduce capital spending, working capital and operating expenses. With further weakening in the global economy, DowDow announced a restructuring in December which will reduce the Company's workforce by approximately 11 percent, close facilities in high-cost locations and divest several non-strategic businesses. "We undertake actions like these with a very clear outcome in mind -- to preserve our financial flexibility and improve our financial performance.

We took aggressive action in 2008 and we will accelerate these actions even faster and more aggressively in 2009," said Liveris. "The measures will also allow us to preserve our strong investment grade rating - a commitment we take very seriously. These actions include an acceleration of expense and capital reduction programs as well as cash preservation measures that ensure we retain our options and financial flexibility during these volatile and uncertain times."

Commitment to DowDow Shareholders

The combination of planned actions on cash flow as well as operating earnings will allow DowDow to continue to pay our regular, quarterly cash dividend, which the Company has done for 389 consecutive quarters without reduction or interruption, since 1912.

- Ends -

About Dow
With annual sales of $54 billion and 46,000 employees worldwide, DowDow is a diversified chemical company that combines the power of science and technology with the "Human Element" to constantly improve what is essential to human progress. The Company delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. References to "DowDow" or the "Company" mean The Dow Chemical CompanyDow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.

About DowDow in the Middle East
DowDow has several current and proposed operations throughout the Middle East. From the opening of its first commercial office in Cairo in the early 1970's, its facility in Jebel Ali in Dubai and its successful joint ventures like EQUATE, MEGlobal and Arabian Chemical Company to its proposed integrated chemical production facility at Ras Tanura in Saudi Arabia, DowDow has established itself as a solid partner in the Middle East petrochemicals industry. DowDow's commitment to the Middle East has also been extended through support for community programs like the Lothan Youth Achievement Center (LoYAC) in Kuwait, Emirates Environmental Group in the UAE and is an active investor in the region's future, by supporting the Young Arab Leaders (YAL) across the region. More information about DowDow can be found at http://www.dow.com/imea/me

About DowDow in Kuwait
DowDow, through its current joint ventures like EQUATE and MEGlobal, has been providing jobs for Kuwaitis both at home and abroad while bringing world class training and technologies to the State of Kuwait for over 10 years. DowDow is a respectable corporate citizen and has always believed in strongly supporting the aspirations of the local communities in which it operates and in contributing to sustainable economic development. DowDow was a premier sponsor of the Kuwait America Foundation dinner in 2008, helping raise over USD$1,000,000 for Kuwaiti and Arab charities. DowDow was also a Gold sponsor of the government's National Manpower "Challenge" Program, aimed at promoting national employment in the private sector in Kuwait. Finally, DowDow has a partnership with the Lothan Youth Achievement Center (LoYAC) with over USD$750,000.00 in financial support to help in the training and advancement of the future leaders of Kuwait.

For more Information, please contact:
David Winder
The DowDow Chemical Company
Tel:+1 (989) 638-0745
Email: dwinder@dow.com

Mira Meghdessian
DowDow Chemical India, Middle East & Africa (IMEA)
Tel +971.4.312.3635 (office)
email: MMeghdessian@dow.com

Hamdi Derkawi
GolinHarris
Tel: +971.4.332.3308
Email: hderkawi@golinharris.com

© Press Release 2009

 

Community Comments (1) - Comment on this article

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Dow should have known better by Anon Anon, Consultant - 06-Jan-09
Some might say the failed Kuwait deal is a taste of its own medicine for Dow, which has a history of pulling out of projects at the last minute itself.

If I recall, it pulled out of the Petrokemya JV in 1980 and has stalled on its Oman project for years. And does it have any intention of going ahead with its long-delayed Ras Lanuf (Libya) scheme?

Moreover, having been present in Kuwait for several years, i find it astonishing that such a large company could have been unprepared for the political criticisms of its Kuwait deal. surely having seen the Project Kuwait and Fourth Refinery projects fail because of parliament, it did not press its message to MPs earlier. All this could have been easily avoide with a little more nous.

Who knows how the Kuwaitis will react to being sued, but it won't go down well for sure. I'm sure Aramco, with which Dow has a JV for the Ras Tanura project, will be taking note with interest. [Report Abuse | Email to a Friend | Reply to this Comment]

 

 

 

 

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