June 9, 2008

Volume 86, Number 23

p. 10

Betrayal

Case Closed

Dow Chemical and two fired executives settle lawsuits

Alex Tullo

Dow Chemical and two executives it fired in April 2007 for trying to sell the company in a leveraged buyout that had not been officially authorized have decided to settle their yearlong related court battle rather than air out more dirty laundry.

"I am extremely pleased that this disappointing chapter in Dow's history has been closed and that the board's swift and decisive response in April last year has been vindicated," Dow CEO Andrew N. Liveris said in a statement.

Under the terms of the agreement, former director and chief financial officer J. Pedro Reinhard and former executive vice president Romeo Kreinberg admit to Dow's contention that they participated in unauthorized discussions to sell the company.

In court documents filed in Delaware last month, Dow alleged that Reinhard had been double-dealing since 2006. Dow says he helped draft a proposal by Access Industries to purchase Dow's commodity chemicals business, an overture Dow rebuffed.

Reinhard then, in Dow's words, proceeded in a "single-minded quest to reach out to Wall Street and across the world for financing and support to accomplish the final betrayal—a takeover of his own employer, Dow." Dow says Reinhard put together a plan later that year for a hostile bid for all of Dow, which Access Chairman Len Blavatnik rejected.

Reinhard and Kreinberg, Dow says, were then involved in a new buyout plan with the Omani government providing funding and JPMorgan Cazenove acting as the investment bank. The transaction would have been valued at more than $50 billion, making it the largest leveraged buyout in history. Kreinberg was to be the CEO and Reinhard, the chairman of the new company. The deal was also presented to the U.S. private equity firms Kohlberg Kravis Roberts (KKR) and TPG Capital.

The plan unraveled last spring when Liveris, investigating persistent rumors about such a buyout deal, received word from Henry R. Kravis from KKR and Jamie Dimon, CEO of JPMorgan Chase, that Dow executives were behind the move (C&EN, April 30, 2007, page 21).

In return for their confessions, Dow is acknowledging the accomplishments of Kreinberg and Reinhard over their long careers at Dow. The executives will not receive any of the $600 million and $75 million in claims that they, respectively, had been seeking, Dow says.

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