7WWW.CEN-ONLINE.ORG DECEMBER 8, 2008

IN THE FACE of tough economic conditions, Dow Chemical is moving ahead with the formation of its K-Dow Petrochemicals joint venture with Kuwait’s

Petrochemical Industries Co., but not before shaving $2.0 billion off PIC’s bill. Dow says it is set to complete the deal at the end of the year and to finish buying Rohm and Haas in the first quarter of 2009.

Originally, PIC was set to fork over $9.5 billion for a 50% stake in Dow’s petrochemical business. Now, it will pay Dow $7.5 billion. In addition, the newly formed K-Dow will pay each partner $1.5 billion. Thus, PIC’s net payment will be $6.0 billion. Dow will rake in pretax revenues of $9.0 billion from the transaction. That’s a decrease of only $500 million from what it would have gained from the deal’s original terms. Dow says its after-tax proceeds will be about $7 billion.

“K-Dow closing in this way—where our pretax pro-ceeds are on the order of magnitude not too far different than what we imagined prior to this economic melt-down—is a terrific win for us,” Dow CEO Andrew N. Liv-eris told stock analysts on a conference call last week.

In addition, more businesses will be included in the joint venture. Under the memorandum of understand-ing the partners signed a year ago, Dow was to contrib-ute its polyethylene, polypropylene, polycarbonate, ethyleneamines, and ethanolamines businesses to a 50-50 joint venture that would have generated about $11 billion in annual sales. Now, the two companies are also chipping in their existing MEGlobal ethylene

glycol and Equipolymers polyethylene terephthalate joint ventures. The partnership’s annual revenues are expected to be $15 billion.

As in the original terms, the deal includes Dow’s existing ethylene cracker complexes in Canada, Argen-tina, and Spain. It doesn’t, however, include the two Equate ethylene joint ventures between the two com-panies in Kuwait because they have minority partners. Liveris said the venture will study future projects in China, India, Vietnam, and Russia.

Liveris told stock analysts that he is proud he could fulfill his promise to complete the deal as scheduled. “When we said we would close K-Dow by year-end, no one anticipated the global melt-down that would occur in Septem-ber and October,” he said. “This deal was closed in an economic environment that none of us have seen in our lifetime.”

Forming K-Dow is critical for Dow because the company needs the money to complete its $18.8 billion acquisition of specialty chemical giant Rohm and Haas. Liveris admitted on the conference call that, given the financial crisis, his two most-asked questions have been about the future of each deal.

Kevin W. McCarthy, a stock analyst with Banc of America Securities, pointed out in a report to clients that the Rohm and Haas purchase is a firm agreement, where-as the K-Dow deal had been, until last week, only a mem-orandum of understanding.“There was brewing concern about the K-Dow deal—and by extension the Rohm and Haas deal—given dislocation of the markets,” he wrote. Inking an agreement with PIC “allays concerns” that the Rohm and Haas deal would close without the K-Dow transaction, a scenario that would have strapped Dow with far more debt, he wrote.—ALEX TULLO

The terrorist attack that unfolded in Mumbai late last month is disrupting the chemical and pharmaceutical industries, if only temporarily. The city is the business hub of a country that is both a market for and a supplier of many pharmaceutical ingredients and research services.

Rafael Beaus, a former president of AFAQUIM, Spain’s fine chemicals asso-ciation, was seriously injured in the leg by metal fragments while in the lobby of the Taj Mahal Hotel with his wife Rosa María, who was also hurt.

So far, however, it appears that very few others from the chemical or drug

industries were harmed in the attacks, which killed at least 170. “Many captains of Indian industry were killed at the Taj, but I haven’t heard of anyone from our industry,” says Zerxes Lashkari, president of the Mumbai-based chemical consult-ing firm YezPer Consultants. Lashkari doesn’t expect many businesspeople to cancel trips to India. “Terrorism happens everywhere,” he says.

The tragedy occurred as the phar-maceutical ingredients trade fair CPhI India was about to open in Mumbai. CPhI postponed the show to an unspecified date. Last year, the event attracted more

than 10,000 attendees. Similarly, the U.S.-based Drug Information Association canceled a conference on drug discovery and development that was scheduled for Dec. 7 in Mumbai.

Large companies are restricting staff travel. A DuPont spokeswoman in Hong Kong tells C&EN that business trips to India now need the approval of the com-pany’s general manager in India. Yet at the Indian drugmaker Piramal Healthcare, Ramesh Krishnan, who manages custom manufacturing projects, says no foreign customer has canceled a trip to India so far.—JEAN-FRANÇOIS TREMBLAY

MUMBAI TRAGEDY Terrorism disrupts chemical and pharmaceutical industries

NEWS OF THE WEEK

DOW MOVES TWO BIG DEALS ALONG

ONWARD: The sale of its petrochemical business enables

Dow’s purchase of Rohm and Haas

Dow’s Tarragona, Spain, site will become part of K-Dow Petrochemicals.

DO

W