MUMBAI (Reuters) - Dow Chemical Co DOW.N will take legal action against Petrochemical Industries Co of Kuwait and is seeking more than $2.5 billion in damages from the Kuwaitis for backing out of a joint venture agreement, the largest U.S. chemical maker said on Tuesday.

Cars drive past a plant of U.S. chemical producer Dow near the eastern German village of Lippendorf south of Leipzig March 25, 2004. REUTERS/Arnd Wiegmann

Dow is considering new partners for the proposed joint venture and has already been approached by two companies interested in its basic plastics business, Chief Executive Andrew Liveris told Reuters in a telephone interview.

Last month, Kuwait decided to scrap a deal to form a $17.4 billion petrochemical joint venture with Dow, potentially upsetting Dow's plans to buy rival Rohm & Haas Co ROH.N.

Dow had planned to use proceeds from the joint venture to repay a large part of the debt financing for the $15.3 billion Rohm & Haas acquisition. Under the joint venture agreement, Petrochemical Industries was to pay Dow $7.5 billion.

Liveris declined to comment on whether Dow would consider renegotiating the Rohm and Haas deal or would consider pulling out of it.

“Rohm and Haas is on strategy and is in the regulatory approval process,” said Liveris.

Shares of Dow were up 81 cents or 5.4 percent to $15.86 in afternoon trade on the New York Stock Exchange following the company’s statement that it plans to pursue legal action against the state-run Kuwaiti firm.

DIVIDEND SECURE

Liveris said Dow has no plans to lower its dividend, now 42 cents per share quarterly, despite the tough global economic conditions and the breakdown of the joint venture agreement.

Dow and other chemical companies are struggling because of recession in most developed countries and a sharp slowdown in emerging economies.

The company said last month it would close 20 facilities, divest several businesses and cut 5,000 jobs to cope with the slump.

The actions will allow Dow to continue to pay a regular quarterly cash dividend, the company said.

“We took aggressive action in 2008 and we will accelerate these actions even faster and more aggressively in 2009,” said Liveris. “The measures will also allow us to preserve our strong investment grade rating -- a commitment we take very seriously.

“These actions include an acceleration of expense and capital reduction programs as well as cash preservation measures that ensure we retain our options and financial flexibility during these volatile and uncertain times.”

LEGAL ACTION

Dow’s joint venture agreement with the Kuwaitis provided for a break-up fee of up to $2.5 billion. Liveris said the company would seek damages over and above that amount.

However, Dow also said it was ready to go ahead with the Kuwaiti deal if Petrochemical Industries remedied the breach of contract.

A spokesman for state-run Kuwait Petroleum Corp, which controls Petrochemical Industries declined to comment.

Standard & Poor’s and Moody’s Investors Service both cut their ratings on Dow last week and left their ratings on review for further downgrade.

Kuwaiti legislators terminated the joint venture agreement due to concerns that the project would not be economically viable in light of the global financial crisis and the slump in worldwide petrochemical sales.

The new venture had been due to market petrochemicals and plastics such as polyethylene, polypropylene and polycarbonate, used in products ranging from plastic bottles and compact disks to computers and agricultural compounds.