June 2 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, said fired executives J. Pedro Reinhard and Romeo Kreinberg settled their defamation claims and admitted to trying to secretly sell the company.

The two executives acknowledge participating in unauthorized discussions about a leveraged buyout of the company, Midland, Michigan-based Dow said today in a statement. Reinhard and Kreinberg no longer dispute a Dow statement announcing their firings on April 12, 2007, the company said.

Reinhard, a former chief financial officer and board member, and Kreinberg, who lead the specialty plastics and chemicals units, previously denied wrongdoing. They received nothing for their defamation and libel claims, and some of their long-term compensation has been restored, Dow spokesman Chris Huntley said.

``Dow probably had a fairly strong case, and top management wanted to move on as quickly as possible,'' Gene Pisasale, who helps manage $25 billion at PNC Wealth Management in Baltimore, said in a telephone interview. ``The market was sensing this outcome.''

Dow fell 56 cents, or 1.4 percent, to $39.84 as of 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 1.1 percent this year.

Reinhard and Kreinberg agreed that they should have told Chief Executive Officer Andrew Liveris about their buyout discussions, Dow said.

`Distressing'

``Pedro Reinhard is pleased with the settlement,'' his attorney, Gary Naftalis, said in an e-mailed statement. ``The dispute with his former company and colleagues was distressing to him personally.''

Naftalis said Reinhard appreciates that Dow's statement acknowledges his long and ``illustrious'' career.

Huntley and Naftalis declined to disclose financial details of the settlement. Kreinberg's lawyer, Stanley Arkin, didn't immediately return a call for comment.

Reinhard planned to become chairman and Kreinberg expected to be CEO after their buyout of Dow, according to a May 13 brief filed by Dow in Delaware Chancery Court. The State General Reserve Fund of the Sultanate of Oman had promised to finance the deal, JPMorgan Cazenove Ltd. was to serve as investment bank and Allen & Overy was retained as counsel, Dow said.

The executives and their associates pitched the buyout plan in meetings with Len Blavatnik, the billionaire owner of New York-based Access Industries LLC; Henry Kravis, co-founder of Kohlberg Kravis Roberts & Co.; and Texas-based TPG Inc., Dow said in the brief.

Secret Meeting

To ensure secrecy during the executives' first meeting with Warith al-Kharusi, chief executive officer of the Omani fund, the Compleat Angler hotel outside London was reserved in its entirety, Dow said.

A JPMorgan Chase & Co. representative at that meeting on Feb. 27, 2007, realized that Kreinberg and Reinhard didn't represent Dow management and were ``a potentially rogue element,'' according to an e-mail cited in Dow's brief.

Stories about a pending takeover of Dow in U.K. newspapers in early 2007 prompted Liveris to contact JPMorgan Chief Executive Officer Jamie Dimon, who promised to investigate. JPMorgan Cazenove, a JPMorgan venture, withdrew from the transaction.

The plans of Reinhard and Kreinberg fell apart after the U.K.'s Sunday Express reported on April 8, 2007, that Kohlberg Kravis and other investors in the U.S. and Middle East were preparing to bid $50 billion for Dow.

The story prompted Liveris on April 9 to call Kravis, who said ``people who knew a lot about Dow'' were involved in the deal, Dow said in the brief. The following day, Liveris spoke with Dimon, who discovered for Liveris that Reinhard and Kreinberg were planning to take Dow private.

Private-equity firms that had been approached about the deal didn't proceed, and the Omani fund ended its efforts after Reinhard and Kreinberg were fired on April 12, the company said.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: June 2, 2008 16:09 EDT