Dow Chemical Co said it had entered into arbitration proceedings to settle a dispute with a Kuwaiti firm that bailed out of a $17.4 billion joint-venture deal, and a person familiar with the matter said the US company had put off a lawsuit for now, reports Reuters.
Dow CEO Andrew Liveris said in January that Dow was simultaneously pursuing both litigation and arbitration against Kuwait's Petrochemical Industries Co (PIC), which backed out of a deal to buy 50 per cent of Dow's plastics business.
Dow has so far not launched any litigation proceedings, the source said.
Dow, the biggest US chemical maker, was widely expected to stop short of taking aggressive action against its Kuwaiti partners for fear of reprisal from Kuwaiti authorities.
Dow has other joint ventures with PIC in Kuwait, and it is also expecting a $1 billion investment from the Kuwait Investment Authority (KIA) that could be jeopardised.
The joint venture agreement fell apart after some Kuwaiti parliamentarians objected to it.
Kuwait's parliament launched an investigation in January into whether there was wrongdoing by officials involved in setting up the joint venture. Dow has denied any wrongdoing.
In a filing with the US Securities and Exchange Commission, Dow said it had initiated arbitration proceedings against PIC on February 18, alleging that PIC had breached its agreement by failing to close the deal on January 2.
Dow is seeking damages in excess of $2.5 billion from the arbitration proceedings. Dow is keeping all options on the table and may pursue litigation later, the person familiar with the matter said.
Dow declined to comment beyond confirming that it was in arbitration proceedings.
Dow agreed in July to acquire Rohm and Haas for $15.3 billion to expand its specialty chemicals business, but the failure of the Kuwait venture has jeopardised the deal.
Dow had planned to use the proceeds, along with the $1 billion KIA investment, to fund the takeover.
Dow said in January it would not close the Rohm and Haas deal on schedule in light of deteriorating economic conditions and the failure of the Kuwait deal.
Rohm and Haas has sued Dow in a bid to force it to close the deal, arguing that Dow had no legal basis to walk away.
Rohm and Haas has asked a Delaware court to order Dow to complete the transaction, and a trial is scheduled to start on March 9.