We've seen plenty of drama in the M&A world in the last year or so. But for a really ripping yarn about high-stakes execution of corporate strategy amid a global economic storm, it's getting hard to top the Dow Chemical Co. story.
Tuesday began with a statement from Dow on how it would respond to a move by its Kuwaiti partners to pull the rug out from under a key joint venture that was about to close. Then CEO Andrew Liveris (pictured), ever willing to articulate and defend his multiyear strategy for transforming Dow, followed up with some key interviews. The Wall Street Journal has helpfully posted some
lengthy excerpts from one, and it's great reading -- not just for the
news nuggets, which are also reported by Bloomberg and others, but for the snapshot it offers of a dealmaking CEO at a really high-pressure moment.
Give Liveris his due. Though he's getting criticism from some quarters for the riskiness of the strategy and he defends himself pretty vigorously at the end against what he calls "armchair critics," he comes across as a thoughtful advocate of his course.
And he's pretty persuasive -- if not terribly specific -- when he says Dow will really be able to do all the different things it now has to do to execute its strategy: close on the Rohm and Haas Co. deal in a reasonable time frame, find a new JV partner for Dow's plastics business, win a financial concession from the Kuwaitis without upsetting other JVs with them or a separately agreed financing agreement for the Rohm and Hass deal, and carry out some divestitures and cost-cutting measures to preserve cash, all while safeguarding Dow's capital structure and dividend. (Though on the dividend point, did he leave himself just a little wiggle room? You be the judge.)
Most intriguing are the clues he drops about the many unknowns. For example, what are the "embarrassments" that might await some parties in Kuwait if the case of the busted JV actually went before a jury? Could they be sufficiently embarrassing to get the Kuwait Petroleum Council, the political body that nixed the deal over the objections of Petrochemical Industries Co., to change its mind?
The political risk angle is just one among many in this epic. There's the bank financing for the R&H deal (
still solid, according to a good piece by Heidi Moore over on Deal Journal). There's the unprecedented volatility in global commodity prices. And if Dow asks for more time or a price cut on R&H, there are presumably some dynamics to consider within the controlling Haas family, whose decision to sell last year made the company, which Dow had long desired, available.
And getting back to the overall project of strategically repositioning Dow, let's not forget the dust-up in 2007 when a senior exec and a board member got fired for allegedly discussing a leveraged buyout of the company without authorization. Wonder where the company would be now if an LBO had happened? Probably not in good shape.
Why did anyone ever think the chemical industry was boring? -
Kenneth Klee
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