It's getting a little old to hear everyone bash the top execs of the company. They are only human you know.
How many people 6 months ago foresaw how badly things would get in such a short period of time? How many of you last summer thought that come January oil would be trading for 40 bucks a barrel? Many analysts were forecasting 200/barrel back then.
Do people expect that management should have foreseen that Kuwait would get hammered with falling oil prices and drop out of the deal? Or that business and credit conditions would deteriorate this much in such a short time?
It's not like management is a bunch of morons, but they like the rest of us are caught in unprecedented times that very few people foresaw. The key to how good management is will be to see what they do now in this current situation.
There is a big difference between being wrong and being an idiot. The ROH deal was a great strategy with plenty of money coming from the Kuwaiti deal. Hindsight is always 20/20. Tell me, how many deals have you seen the Kuwaitis back out of? We just were very unlucky, and got stung. Whether management is good or bad will depend on how they manage all this going forward, but for gosh sake stop placing all the blame on them like they should be omnicient.
Only a complete moron wouldn't have made the ROH deal contingent on K-Dow closing. Their is no excuse for such incompetence. We shareholders pay these idiots MILLIONS to make decisons like that? Get real!
They are not failures just because of one incident , they are failures because:
1) Stock price has decline 73.4% under their reign of horror 2) They establish a strategy based on asset light market facing and have not been able to complete even one deal 3) K-dow was a cornerstone in sir evil's strategy and he could not pull it off 4) ROH is now too costly given the market conditions and he can do nothing about it. 5) Kuwait walks without necessarily paying a penalty 6) ROH agreements heavily favors ROH 7) Where's the contingency plan and why isn't it in play ...etc
Nero fiddle's Rome burns .... It's systemic failure / behavior not a one time thing
Excuse me, but that's why they pay their lawyers $750 per hour. Clearly the DOW lawyers were out-lawyered by both the ROH and the Kuwait lawyers and should be fired! I would be shocked if we weren't charged at least $50 mm in legal fees for these two deals and we sure as hell didn't get our money's worth.
BTW, Just because a handfull of so-called analysts were predicting 200 oil, only a foolish CEO would do a deal like this based on such predictions. There were just as many competent analysts predicting last summer that we would be below 100 a bbl as were predicting we would be at 200.
You partially have a point. You have a point that it was difficult, if not impossible to predict all these calamities. You are right only partially, because a prudent management has contingency plans. They could have worked in provisions in either or both deals that would address these catastrophic outcomes. I guess they were blindsided with the price war with BASF. However, it would have been better to pay top dollar, then to leave yourself open to this.
Now, they have to make the best out of it.
1) Dispatch a strong team to the Middle East, including politicos that have strong ties there. Ask for help from the State Dept. Try to get either a similar deal done (tough), or pressure Kuwaitis to increase their loan on more favorable terms as a compensation for the KDow fiasco. I feel that it is attrocious how the US does(not) use it's diplomatic/military clout to benefit dmoestic corporations (see what French do).
2) Firm up the bridge loan, go to Buffett for advice, do a lot of math and chart the financial and strategic course forward (sell additional assets, make more cuts in the combined entity?). Dividend is not a sacred cow anymore, either.
The alternative of reneging on the ROH deal absent a reg. lifesaver is very dubious at best. It means losing billions for sure, the question is just how many.