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Dow Chemical Gets $2.19 Billion for Canceled Kuwait Deal

Dow Chemical Co. CEO Andrew Liveris
Dow Chemical Co. Chief Executive Officer Andrew Liveris said today that "Dow and Kuwait share a long history, and payment of this award brings final and appropriate resolution and closure to the issue." Photographer: Scott Eells/Bloomberg

Dow Chemical Co., the largest U.S. chemical maker by sales, said it received $2.19 billion in cash from Petrochemical Industries Co. of Kuwait as compensation for the cancellation of a joint venture more than four years ago.

The payment reflects the full damages awarded by the International Chamber of Commerce as well as recovery of Dow’s costs, the Midland, Michigan-based company said today in regulatory filing. Dow plans to use the money to pay down debt and remunerate shareholders, Chairman and Chief Executive Officer Andrew Liveris said today in a statement.

“This was earlier and larger than we expected, and gives management more flexibility for evaluating the structure of Dow’s portfolio,” Laurence Alexander, a New York-based analyst at Jefferies & Co., said in a report today.

PIC, a unit of state-owned Kuwait Petroleum Corp., canceled a contract forming K-Dow, a 50-50 venture with Dow’s plastics unit, in December 2008. The failure of the venture deprived Dow of a $9 billion payment during the financial crisis, almost derailed its 2009 purchase of Rohm & Haas Co. and prompted the company’s first dividend cut.

Dow rose 1.6 percent to $34.54 at the close in New York, the highest since Jan. 30. The shares have gained 6.8 percent this year.

Excluding Interest

Dow said in the filing the payment was “exclusive of interest,” which has been accumulating since the company was awarded $2.16 billion in May 2012. Dow and PIC entered into a deed on May 6 that provides for the settlement and assures that Kuwait Petroleum won’t take “retaliatory or punitive actions” against Dow as a result of the payment, according to the filing.

Dow was to receive $2.48 billion with the addition of interest and costs, the company said in a March 4 statement.

Dow still has four joint ventures with Kuwait that predate K-Dow, including Equate Petrochemical Co. and MEGlobal, which make ethylene glycol, a chemical used in antifreeze and polyester.

“Dow and Kuwait share a long history, and payment of this award brings final and appropriate resolution and closure to the issue,” Liveris said in the statement.

PIC canceled the joint venture under pressure from Kuwaiti lawmakers. Kuwait’s parliament has since demanded an investigation into why the contract was canceled.

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