Dow merge some operations with Olin

Dow to merge some operations with Olin

6:58 AM, 31st March 2015
Dow to merge some operations with Olin
Andrew N Liveris, Chairman and Chief Executive Officer, Dow.

MIDLAND, US: The Dow Chemical Company and Olin Corporation announced today that the boards of directors of both companies unanimously approved a definitive agreement under which Dow will separate a significant portion of its chlorine value chain and merge that new entity with Olin in a transaction that will create an industry leader with revenues approaching $7 billion. The transaction has a tax efficient consideration of $5 billion, and a taxable equivalent value of $8 billion to Dow and Dow shareholders. It is highly complementary to the strategic objectives of both companies, with significant potential to enhance value for both Dow and Olin shareholders, and create substantial benefits for customers.

The terms of the agreement call for Dow to separate its US Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, and then merge these businesses with Olin in a Reverse Morris Trust transaction. The merger will result in Dow shareholders receiving approximately 50.5 per cent of the shares of Olin, with existing Olin shareholders owning approximately 49.5 per cent.

The transaction is valued at $5 billion, and includes $2.0 billion of cash and cash equivalents to be paid to Dow; an estimated $2.2 billion in Olin common stock using the Olin stock value as of close on March 25, 2015; and approximately $800 million of assumption of pension and other liabilities. In addition, by virtue of the joint share ownership, both sets of shareholders will benefit from a minimum of $200 million in projected annual synergies and cost savings.

Following the completion of the transaction, Olin will be an industry leader in chlor-alkali and derivatives – benefiting from the combination of complementary businesses, significant scale, integration, cost-advantaged feedstocks, and a broad and diverse end-uses portfolio. Expected cost synergies of the transaction include network optimization which will facilitate output expansion, significant logistics savings and benefits, and the potential for expansion of existing products produced by Olin and Dow into additional geographies and to additional customers. Annual revenues of the combined business are anticipated to be approximately $7 billion and EBITDA is expected to be $1 billion on a 2014 pro forma basis, excluding synergies. The transaction is subject to a vote by Olin shareholders and is expected to close by year-end 2015.

“By combining Dow’s world-class assets and people with Olin, we are creating a premier company with the scope and capabilities to optimally leverage long-term growth opportunities in the marketplace and generate significant shareholder value. We have jointly created a solid foundation for success for Olin, driven by the benefits of greater scale, an enhanced ability to capitalize on globally advantaged cost positions backed by US shale gas economics, technology advantages, broader market access and significant envelope integration,” said Andrew N Liveris, Chairman and Chief Executive Officer, Dow.

“This milestone is a powerful shift in our portfolio towards targeted, integrated high performance sectors and end-markets that will drive further margin expansion, earnings growth, and return on capital – with a deal structure designed to maximize total shareholder return. With this transaction we will exceed our target to divest $7 billion to $8.5 billion of non-strategic businesses and assets. This achievement will allow us to have an ongoing focus to continue to enhance shareholder remuneration, reduce debt and continue to invest in future growth in our high priority and high margin businesses,” added Liveris.

 

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