Dec. 1 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, accepted a lower price for a 50 percent stake in its basic-plastics unit from Kuwait’s Petrochemical Industries Co. because of a weak global economy and lower oil prices.

Dow will receive $9 billion in pretax proceeds, less than the $9.5 billion announced 11 months ago, Chief Executive Officer Andrew Liveris said today in an interview. Dow signed definitive agreements with Kuwait’s state-owned chemical maker, clearing the way for K-Dow Petrochemicals to start operating Jan. 1, Midland, Michigan-based Dow said today in a statement.

Liveris will use the proceeds to help pay for Dow’s $15.4 billion purchase of Rohm & Haas Co., which will add more- profitable specialty chemicals. Dow agreed to the lower price on the Kuwait deal because the global recession has reduced the value of the plastics unit, and falling oil prices have hurt Kuwait’s economy, Liveris said.

“A year ago, this was a great deal in very good economic conditions,” Liveris, who is en route to Kuwait, said in a telephone interview from the Middle East. “Today, it is a phenomenal deal in very miserable economic conditions.”

Dow fell 62 cents, or 3.3 percent, to $17.93 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 55 percent this year. Philadelphia-based Rohm & Haas rose $2.41, or 3.5 percent, to $70.82 and was one of only two stocks in the Standard & Poor’s 500 Index to gain today.

Kuwait’s Supreme Petroleum Council approved the transaction at the reduced price on Nov. 24, and the agreements were signed Nov. 28, Liveris said. K-Dow will be the world’s largest producer of commodity plastics, including polyethylene, used in milk jugs, food packaging and plastic pipes.

‘Brewing Concern’

“There was brewing concern about the K-Dow deal, and by extension the Rohm & Haas deal, given the dislocation of the markets and implications for valuation,” Kevin McCarthy, a New York-based analyst at Banc of America Securities, said in a report. “Today’s announcement suggests that K-Dow is highly likely to proceed, albeit on terms that appear more favorable to Kuwait.”

K-Dow will use cheaper Kuwait oil to make raw materials for potential projects in China, Vietnam and India, and natural-gas- derived ethane for factories in Kuwait, Egypt, Libya and Russia, Liveris said. The venture will have $15 billion in annual revenue with the addition of two existing Kuwaiti projects, MEGlobal and Equipolymers.

Dow will receive $7.5 billion for the plastics-unit stake after $1.2 billion in adjustments for net debt and working capital, Liveris said. The venture will pay $1.5 billion to Dow and the same to Petrochemical Industries. That boosts Dow’s proceeds to $9 billion and reduces Kuwait’s net payment to $6 billion, Liveris said on a call with analysts and investors.

Proceeds

After-tax proceeds including the dividend will be about $7 billion, with the $2 billion in taxes being paid during the course of a year, Chief Financial Officer Geoffery Merszei said on the call. The venture will begin with $3.3 billion of debt, he said.

The Rohm & Haas acquisition should close in the first quarter, Liveris said. Dow’s debt will be about 40 percent of total capital when that deal is completed, he said.

The K-Dow venture allows Kuwait to diversify its economy’s focus on oil and gas to petrochemicals and plastics, Maha Mulla Hussain, Petrochemical Industries chairman, said in the Dow statement.

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

Last Updated: December 1, 2008 16:13 EST