PHILADELPHIA (AP) -- Rohm & Haas Co. said its proposed acquisition is still in effect even though the Kuwaiti government has canceled a $17.4 billion joint venture with U.S. petrochemical company Dow Chemical Co.
On Sunday the Kuwait government said the joint venture, known as K-Dow Petrochemicals, was "very risky" due to the global financial crisis and low oil prices. The move came just days before the joint venture's Jan. 1, 2009 startup date.
Dow Chemical is also targeted to close on its $15.3 billion buyout of specialty chemicals maker Rohm & Haas early next year. Rohm & Haas shareholders approved the transaction on Oct. 29.
The deal includes money from a Kuwaiti sovereign wealth fund and Warren Buffett's Berkshire Hathaway of Omaha, Neb.
The Kuwaiti Investment Authority is helping to fund the deal in the form of $1 billion in convertible preferred securities, while Berkshire Hathaway has agreed to an equity investment of $3 billion in the form of preferred securities.
After the deal closes, Berkshire Hathaway will become Dow's largest shareholder.
Late Sunday Rohm & Haas said the K-Dow joint venture is not a closing condition of its proposed acquisition by Dow Chemical.
Meanwhile, Dow Chemical said it was "extremely disappointed" with the Kuwaiti government's decision and was evaluating its options under the joint-venture agreement.
Dow, one of the world's largest chemical companies, and Kuwait's Petrochemical Industries Co., a subsidiary of the Kuwait Petroleum Corp., had hoped the joint venture would help them snag a larger share of the global chemicals market and boost profitability.
The project, in which Kuwait was to hold a $7.5 billion stake, had been criticized in the country as a waste of public funds, and lawmakers threatened to question the prime minister in parliament if it were launched.
But trouble for the joint venture mounted with a sharp drop in crude oil prices -- from mid-July highs of nearly $150 per barrel to under $40 currently. The declining oil prices have hit Kuwait and its oil-rich Gulf Arab neighbors hard. The Kuwaiti stock exchange has fallen by about 35 percent since the beginning of the year, and some investors have criticized the government for what they said was a lack of action to stave off the impact of the global meltdown.
Dow has also faced difficulties, announcing earlier this month that it was cutting about 11 percent of its work force, closing 20 plants and selling off several businesses to cut costs amid the financial downturn.