Dow Chemical Co. has fired two high-level executives for holding unauthorized negotiations with third parties about the possibility of a leveraged buyout of the company. Midland-based Dow Chemical has said in a release that senior adviser Pedro Reinhard and Executive Vice President Romeo Krienberg were dismissed with approval of the board. However, Reinhard officially remains a member of the board of directors awaiting a meeting of the board about his future. The terminations were announced after four days when a British newspaper reported that a private equity bidder had lined up a $50 billion-plus takeover approach for the chemical firm.

While the board has warned private equity that the company is unambiguously not for sale, it found this week that its former chief financial officer, still a board member, and a divisional head were involved in holding unauthorized negotiations over a possible bid. The statement of the company said, ‘Reinhard and Kreinberg had engaged in business activity that was highly inappropriate and a clear violation of Dow’s Code of Business Conduct.’ On Monday, Dow Chemical had issued a statement to stop rumors saying it ‘has had no discussion about a leveraged buyout’ and that the board ‘fully supports Dow’s management team.’

Following the rumor earlier this week Dow Chemical had began investigations to find out where the takeover talk was stemming from, the spokesman of the company said. However, he turned down to provide particulars about these inquiries but said that they were engaged in discussion with ‘people that might know.’ In addition, Dow Chemical is not revealing which third parties the two executives had been in negotiations with and the details of how they had proceeded. The spokesperson for the company further said, ‘the company does not know at what stage the deal talks were. This has all happened very quickly’.

Evidently, Dow Chemical is also not clear yet if the two executives were the source of the leaks to the press. The news reports had appeared in the British tabloid press, whereas the two men in question are based in the US. In February an Indian newspaper had reported that Reliance Industries, Indian chemicals group, was speculating a takeover offer for Dow. A month later another Indian newspaper again reported that Dow was considering a merger with Reliance.

As a matter of fact, JPMorgan Cazenove, the financial adviser, had first suggested a deal to break up Dow Chemical to a group of Middle Eastern investors late last year. Moreover, the strategy was designed as a proposal by the Cazenove advisers and never went beyond preliminary planning. And no private equity firms were approached and the financial advisor was never entrusted to pursue the deal.

Reacting to the development, Kreinberg said, ‘This is highly damaging to my reputation after 30 years with Dow Chemical. I have never done anything to damage the company. It’s unreal that five countries would come together to take over a chemical company.’ He further added, ‘there was no document or legal paper or statement to respond to’.

In reply to Kreinberg’s comment, Dow spokesman Chris Huntley has categorically said, ‘We have the information from a highly reliable source that would know what was going on, and who we have absolute confidence in.’

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