Risk & Compliance

SEC Probes Dow, Cites Secret Meeting

An alleged clandestine meeting between Dow Chemical executives and potential buyers is the subject of a new government investigation.
Stephen TaubMay 25, 2007

The Securities and Exchange Commission has launched an inquiry into whether two senior executives at Dow Chemical secretly tried to seek a buyer for the chemical giant, according to The New York Times. In addition, the SEC is probing unusual trading in Dow stock as a result of the alleged actions, said the paper, citing people briefed on the matter. Reportedly, the government inquiry is still in the informal stage.

In April CFO.com reported that Dow Chemical fired senior adviser Pedro Reinhard, a former chief financial officer and board member, and Romeo Kreinberg, an executive vice president, after determining they were “involved in unauthorized discussions with third parties about the potential acquisition of the company.” The company did not provide further details about the potential deal at the time. However, the SEC has requested information from Dow, Kreinberg, and Reinhard, noted the Times.

In February Britain’s Sunday Express reported that a bid for Dow was in the offing, and in April the paper noted that a group of private-equity firms and investors from the Middle East were close to announcing a $50 billion buyout. No connection has been made between the reported buyout and the current SEC investigation.

The SEC inquiry may also examine a deal that Dow did pursue — its offer last fall to acquire DuPont for more than $40 billion, said the Times. But DuPont rebuffed Dow’s advances and never engaged in negotiations, according to the report.

It is unclear whether the SEC plans to pursue civil actions against the two individuals or whether any investors improperly traded on information related to a possible buyout of Dow, noted the Times. But the regulator is seeking certain information from JPMorgan Chase about the work it completed on the DuPont takeover proposal and the people and companies involved in the discussions.

Earlier this month, Reinhard sued Dow for libel and breach of contract.

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