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Dow Chemical Hurts Dow Jones

In the last hour of today's trading, the Dow Jones Industrial Average is down about 70 points, or less than one percent, and has been down for most of the day.

Analysts believe that the Mideast violence is partly to blame for the Dow dip, but are also giving part of the blame to another Dow: Dow Chemical.

Yesterday, the government of Kuwait scrapped a $17.4 billion petrochemical joint venture with chemical giant Dow, as Kuwaiti leaders felt the sum was too great to spend during a time of falling oil prices. (Oil, which traded as high as $147 per barrel last summer, is trading today for about $40 per barrel.)

Dow pushed for the JV in order to reduce its reliance on commodity prices and to diversify.

The back-out by the Kuwaitis was a left hook to Dow stock. But it also absorbed an uppercut from analyst speculation that the deal's disintegration could hurt Dow's ability to conclude a separate deal to buy rival Rohm and Haas in a $15.4 billion transaction.

Kuwait had promised to pay Dow at least $7.5 billion in the deal, which Dow would have used to help pay off some $13 billion in debt it would assume in buying Rohm and Haas. (Great time to take on billions in new debt, right?)

But other analysts said today that the Dow-Rohm deal is fully financed by a one-year bridge loan and convertible preferred investments by Warren Buffett's Berkshire Hathaway and -- of all people -- the Kuwait Investment Authority. So, evidently, Dow is not solid enough for Kuwait to buy into but a Dow-Rohn tie-up is.

(Buffett is the lead director of The Washington Post Co.)

In last-hour trading today, shares of Dow are down about 18 percent, at about $15.50.

-- Frank Ahrens
The Ticker is Twittering!


By Frank Ahrens  |  December 29, 2008; 3:25 PM ET
Categories:  The Ticker  | Tags: Dow Chemical, Dow Jones, Kuwait, Warren Buffett  
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