Monday, October 22, 2007

The Dow Chemical (DOW), DuPont (DD) Drama Deepens

The drama between Dow Chemical (DOW), DuPont (DD) and JP Morgan (JPM) won't go away ands if anything, looks to become a fascinating read.

In May I wrote about an upcoming SEC investigation in the mess, "The investigation might also probe Dow's attempt last autumn to buy DuPont (DD)in a deal worth over $40 billion. At the time, neither company disclosed that Dow had approached DuPont. DuPont turned Dow down, but its stock rose 15% between September and December. The SEC is also examining the unusual trading that resulted from their actions in both companies stocks. Another question that will need to be answered is who at JP Morgan let the "cat out of the bag" to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard since it appears JP Morgan was working both deals simultaneously?"

Romeo Kreinberg, former head of the specialty plastics and chemicals units and one of the executives fired , claimed in a court filing recently that JPMorgan CEO Jamie Dimon implicated him in the dealings to "curry favor" with Dow Chemical, a client.

"JPMorgan was intimately aware -- and in fact acted as the driver of -- leveraged buyout efforts targeting Dow," Kreinberg said in court papers. "At all relevant times, the bank owed Dow a fiduciary duty that was breached when it participated in leveraged buyout efforts that it failed to disclose."

Kreinberg requested in his court filing last Friday that Dimon and JP Morgan be added as defendants on the suit, claiming any breach of fiduciary duty committed was by the bank, not him.

JPMorgan provided Dow with a so-called sum-of-the-parts study that analyzed the value of the company's various businesses, Dow spokesman Chris Huntley said. Huntley added that study was unsolicited and that "it's the sort of thing we routinely receive from investment banks, and we did nothing with it."

This is going to get good. I postulated in May that Dimon and JP Morgan were playing both sides of the fence and most likely had much more culpability here than initially thought. This is just beginning and ought to get very interesting. It is good that Kreinburg is focusing on Dimon and JP Morgan. It would lead us to believe as I have said that Dow CEO Andrew Liveris indeed reacted to event and did not participate in them.

I would love to see the "sum of the parts" study Morgan provided DOW though..

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