Jan. 6 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, plans to seek more than $2.5 billion from Kuwait for canceling a joint-venture agreement and will consider a new partner to invest in its basic-plastics business.

Two other parties have approached Dow about acquiring an interest in the unit, the world’s largest maker of polyethylene plastic, Chief Executive Officer Andrew Liveris said today in an interview from company headquarters in Midland, Michigan. Liveris said he expects at least six potential partners to bid, and a new deal should be announced this year.

Liveris is trying to save plans to acquire specialty chemical maker Rohm & Haas Co. after Kuwait’s cancellation of the venture last month deprived Dow of cash earmarked for the acquisition. A new partnership and the sale of some units will raise at least $7.5 billion, Liveris said.

“This is a positive development for Dow and an indication that they are actively pursuing ways to raise cash and salvage their pending deals,” Gene Pisasale, who helps oversee about $13 billion at PNC Capital Advisors in Baltimore, said in an interview. “Dow management will be aggressive and proactive in these efforts, and ultimately we expect them to be successful.”

Dow rose $1, or 6.6 percent, to $16.05 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest gain since Dec. 8. Philadelphia-based Rohm & Haas fell $2.28, or 3.6 percent, to $61.54.

Rohm & Haas

Liveris declined to say whether he has spoken with Rohm & Haas to request new terms for the $15.4 billion acquisition. The purchase would add products used in electronics and acrylic paints and decrease Dow’s reliance on sales of basic chemicals and plastics.

“We will stay on strategy,” Liveris, 54, said in the telephone interview. “The news of our demise is greatly exaggerated.”

Representatives of Kuwait’s state-owned Petrochemical Industries Co., which was to buy a 50 percent stake in Dow’s commodity-plastics unit, didn’t show up to sign closing documents at a New York law firm on Jan. 2, Liveris said. The venture would have paid each partner $1.5 billion, boosting Dow’s proceeds to $9 billion and reducing Kuwait’s net cost to $6 billion.

Petrochemical Industries Chairman Maha Mulla Hussein said Kuwait is not in breach of its contract with Dow.

“The action we did is according to the agreement,” he said in a telephone interview today.

Kuwait Letter

Closing the transaction without government approval would have violated terms of the accord, Hussein said in a Dec. 31 letter to Dow that was disclosed today in a regulatory filing. Petrochemical Industries “remains committed to the transaction” and is considering how to persuade the government to reverse its decision, according to the letter.

Dow said today it still is prepared to complete the venture with Kuwait immediately if the decision is changed. If not, Dow said it will seek damages from Kuwait in court and in the International Chamber of Commerce in London, as specified in the canceled agreement. Damages aren’t limited to the $2.5 billion termination fee, Liveris said.

“We are seeking multiple billions of dollars in remedy, and we will pursue all legal options to get that,” he said in the interview. “That’s what I consider the minimum of what we should do in this situation. There is a breach of a commercial contract.”

Venture Canceled

Kuwait canceled the venture on Dec. 28 after the government came under pressure from opposition lawmakers to scrap the deal, which they said was overpriced amid falling oil prices. Some members of parliament threatened to publicly question Prime Minister Sheikh Nasser al-Mohammed al-Sabah, a nephew of Emir Sheikh Sabah al-Ahmed al-Sabah, Kuwait’s ruler.

Crude-oil futures in New York have dropped by about two- thirds from the record $147.27 a barrel in July amid signs that a deepening global recession is cutting demand for fuel and energy.

Standard & Poor’s and Moody’s Investors Service both downgraded Dow on Dec. 29 after the Kuwait deal collapsed. Dow would have gotten about $7 billion after taxes from Kuwait’s investment.

Dow plans to use a $13 billion bridge loan, a $3 billion equity investment by Warren Buffett’s Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority to pay for Rohm & Haas.

Investment Secure

Liveris said today that the Kuwait investment and the bridge loan still are secure. He also said he has spoken with Berkshire Hathaway and that Buffett plans to maintain his interest in Dow Chemical.

“The acquisition of Rohm & Haas is fully on company strategy,” Liveris said. The deal still is in the regulatory approval process, he said.

Dow needed only about $5 billion of the bridge loan with the Kuwait venture proceeds, Chief Financial Officer Geoffery Merszei said in October.

A new deal for the plastics unit can be completed quickly, because all the work to carve out the business already is done, Liveris said. Potential investors will have cash and access to low-cost petroleum, used to make plastics, he said.

“Those people with money and feedstocks have a strong interest to diversify away from oil and gas and to instantaneously become the No. 1 plastics company in the world,” Liveris said. “It is an opportunity that comes once in a generation.”

The sale of commodity units may include selling all or a portion of Dow’s stake in its joint ventures, Liveris said. Dow also may seek a special dividend from its ventures to raise cash, he said.

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

Last Updated: January 6, 2009 16:32 EST