According to public information available on Yahoo’s Dow Financial page and MFFAIS, this institution is invested heavily in The Dow Chemical Company. Last summer, Dow chemical entered into an auction to acquire specialty chemical maker Rohm and Haas. Dow’s chairman Andrew Liveris agreed to pay a 70% premium for Rohm and Haas stock. The Board of Directors approved this deal despite the fact that the only guaranteed financing in place was in the form of two loans of $ 3 billion and $1 billion pledged by Warren Buffet and the Kuwaiti Investment Authority, respectively. A deal to sell a portion of the plastics business to Kuwait Petrochemical to help fund the Rohm and Haas acquisition was grossly mismanaged by Dow’s legal counsel and senior executives so that when Kuwait Petrochemical backed out of the deal, Dow had no practical legal recourse to force consummation. Consequently, the remainder of the Rohm and Haas transaction was provided by a one year bridge loan via a consortium of banks. When Dow was sued by Rohm and Haas shareholders to complete the deal, Dow was forced to fund the majority of the acquisition with the bridge loans, ultimately leading to a lowering of its credit rating to BBB minus, one notch above junk status. The reckless behavior of Dow’s CEO and Board of Directors put Dow Chemical in a precarious position causing its stock to lose 80% ($30 billion) of its value in an approximate 10 month period. Additionally Dow cut its dividend (by 64%!) for the first time since 1912. Since the closing of the Rohm and Haas deal, partially financed by additional equity offerings, Dow’s stock has recovered somewhat but is still done over 70% from last year.
Since many of you who frequent this board have an indirect financial interest in DOW through your institutional investments, I am encouraging you to contact your institutional representatives to urge them to vote out Dow’s current board of Directors at the upcoming shareholder’s meeting (May 14). The current board includes two current corporate officers, President, Andrew Liveris, and CFO Geoffrey Merszei in addition to former VP Manufacturing Arnold Allemang. It is clear that a Board so heavily influenced by corporate officers cannot objectively manage risk. While CEO Liveris will cite that a confluence of “extraordinary” circumstances was responsible for Dow’s demise, it was really extraordinary incompetence in agreeing to a iron clad $15 billion cash buyout without equally iron clad sources of funding for the transaction. Ironically, Liveris recently managed to retain his position on the CITI board of directors where he served on the Auditing and Risk Management Committee. Please take the time protect your investments by contacting your institutional representatives to urge them to replace the current Dow BOD.