Dow Drizzles on LBO Parade

Thursday's shake-up atop Dow Chemical (DOW Quote) exposes one of the seamier sides of the leveraged buyout boom.

The Midland, Mich., chemical giant fired two top officials -- director and former finance chief Pedro Reinhard and executive vice president Romeo Kreinberg -- after finding they "were involved in unauthorized discussions with third parties about the potential acquisition of the company."

And that's not all. Dow CEO Andrew Liveris said in a Thursday morning statement that the company was "greatly saddened by the disrespect shown by our former colleagues."

Liveris' comments have a Don Corleone-esque flavor. But what has yet to be disclosed is just what constitutes the alleged disrespect.

Reinhard, who tells TheStreet.com that he denies any wrongdoing, was left shaking his head.

"This is a major surprise," he says, reached on his mobile phone in New York. "I'm retired. I've been with [the] company for 35 years. Maybe there's some kind of scapegoat going on."

Dow's shares have spiked this week amid a flurry of rumors in U.K. papers about a possible takeover. The scuttlebutt prompted Dow to issue a public statement Monday disavowing the LBO rumor. Still, shares rose 5% Monday and tacked on 3% in heavy trading Thursday.

It's not unusual for directors and execs to field inquiries from private equity shops -- especially lately, with deal activity having been so strong. But Dow accuses Reinhard and Kreinberg of maneuvering to line up leading jobs tied to a buyout and subsequent breakup of Dow.