A Case of Asbestos Exposure at Dow?

For 18 months, government antitrust lawyers blocked Dow Chemical's $11.6 billion deal to acquire Union Carbide after the plan was announced in August, 1999. The transaction was finally allowed to go through last February, after Dow agreed to a package of divestitures limiting its market clout. Today, many Dow (DOW ) shareholders may be wishing the Federal Trade Commission had never relented.

The reason for their discontent? By buying Union Carbide, Dow not only became the world's biggest chemicals company but it also picked up a docket of asbestos liability cases that industry analysts warn could eat into earnings for years to come. This isn't just a mild case of investor jitters. Since Jan. 9, when Dow settled a Texas lawsuit against Union Carbide, its share price has skidded 23%, to close at $26.83 on Jan. 18. The plunge wiped out $7.16 billion in equity and put Dow shares back where they were in October, 2000.