Three wrongs won’t make a right for Dow Chemical. It made its first big mistake last summer by agreeing to buy specialty chemicals firm Rohm & Haas for $15.3bn, a steep 74 per cent premium, just before valuations collapsed. It compounded the error by planning to pay in part with proceeds from a $9.5bn cash infusion it expected this month from its K-Dow commodity chemical joint venture with a state-owned Kuwaiti firm. Blindsided by Kuwait’s withdrawal from the deal a month after agreeing to new terms, Dow faces a financing crunch and may be on the verge of committing a third costly mistake.

The airtight terms of the Rohm deal mean that, with or without the K-Dow proceeds, the price will start to escalate if Friday’s deadline is missed. Meanwhile, Dow’s decision to sue the Kuwaitis may yield up to $2.5bn through an international arbitration clause. But that will take time. Even though borrowing costs will surge, Dow can and should still bite the bullet and tap an agreed bridge loan to buy Rohm. It might soften the blow by paying in part with $2.5bn in treasury stock, but Dow must make this attractive to Rohm’s shareholders.

Instead, Dow is expected to drag its feet and pursue other interested partners for its commodity chemicals business while speeding smaller divestitures. This is known as buying high and selling low and Dow should reconsider – simply buying high is bad enough. Given its desperation and the sharp drop in industry valuations, it is unlikely Dow will serve shareholders well by hocking the family silver, however tarnished it looks in today’s recession. The group’s market value is just $14.5bn. Dow also has ruled out breaking its 389-quarter streak of steady or rising dividends even though the $1.6bn it pays out annually would roughly cover the interest burden for financing Rohm. Bad chemistry indeed