Shares in Dow Chemical surged by 8 per cent yesterday after the American plastics and chemicals group effectively sold a 10 per cent stake to Kuwait for almost $10 billion (£4.9 billion).

Dow said that the Kuwait Petroleum Corporation, the state-run oil group, is paying it $9.5 billion in return for a 50 per cent share in a new joint venture between the two companies.

The deal will give Dow’s new business access to cheap natural gas from the Gulf, which it uses to produce high-margin plastics. Until now, Dow has struggled to keep pace with the rising cost of natural gas. It buys its gas from the Gulf of Mexico, which is far more expensive than Kuwait’s extensive natural gas reserves.

The American group is putting into the joint venture five of its chemicals and plastics units – representing 22 per cent of its revenue last year. It is not yet known who will head the new business, but a spokesman said that a new management team would be set up, with half of it nominated by the Kuwaitis and half by the Americans.

The joint venture will make chemicals used to produce plastic bottles, compact discs, computers and agricultural chemicals. The new business will start life with about $11 billion of sales, will be based in the US and will employ more than 5,000 people worldwide.

Dow has already given warning that it has suffered from the rising cost of energy used in producing its chemicals and it expects this to affect its fourth-quarter results. Wall Street has been urging Dow to cut its exposure by selling low-margin chemical operations.

Saad Al-Shuwaib, chief executive of Kuwait Petroleum, said in a statement: “By selectively investing in downstream petrochemical businesses, we are maximising the value of Kuwait’s hydrocarbons resources, while diversifying our national economy and increasing job opportunities.”

Andrew Liveris, chief executive of Dow, said that he expects the joint venture to increase its revenue by about 6 to 8 per cent a year, once the deal is completed by the end of next year. It requires regulatory clearance.

Mr Liveris hinted that Dow may make another sizeable acquisition, describing yesterday’s deal as “penultimate”. He is expected to use the $9.5 billion of Kuwaiti money to help to fund any further deal.

Times Recommends

• Equitable Life halts £7bn sale on market turmoil
• Potential buyers emerge to save Woolworths staff
• Terrorist attacks close Bombay Stock Exchange