Transaction is Highly Accretive to Dow, with
a Tax Efficient Consideration of $5 Billion
The Dow Chemical Company (NYSE: DOW):
- Dow to separate a significant portion
of its chlor-alkali and downstream derivatives businesses and merge
them with Olin in a tax-efficient Reverse Morris Trust transaction
that creates an industry leader with revenues approaching $7
billion; Dow shareholder value will be further enhanced through the
ownership of shares in the combined company.
- Transaction is highly complementary to
the strategic objectives of both companies, with substantial
synergies and significant potential to enhance value for both sets
of shareholders.
- Represents highly synergistic
transaction with significant growth opportunities; Olin expects to
achieve annualized cost synergies of a minimum of $200 million,
which are anticipated to be fully realized within 36 months.
- Transaction is highly accretive to Dow
and Dow shareholders, with a tax efficient consideration of $5
billion, and a taxable equivalent value of $8 billion.
- Transaction is a significant
achievement in executing Dow’s strategic transformation to a
focused provider of high value, differentiated products based on
key integrated and innovative value chains, such as Dow’s
advantaged ethylene and propylene derivatives.
- The strategic relationship between Dow
and Olin resulting from this transaction will enable Dow to
continue to benefit from its integration efficiencies in chlorine
for key downstream applications; Olin will expand its downstream
portfolio of chlorinated products and benefit from the opportunity
provided by low-cost ECU production on the U.S. Gulf Coast.
- Olin will become a leading, low-cost
global player in chlor-alkali and derivatives while enhancing its
existing presence in key geographies; Olin will more than double
its scale and drive incremental growth as a result of the combined
companies’ product and process technologies, networks, logistics,
creating substantial customer value.
The Dow Chemical Company (NYSE: DOW) and Olin Corporation (NYSE:
OLN) 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 U.S.
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 percent of the
shares of Olin, with existing Olin shareholders owning
approximately 49.5 percent.
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.
In a separate, arms-length transaction, Dow and Olin agreed to a
20-year long-term capacity rights agreement for the supply of
ethylene by Dow to Olin, in which Dow will receive up-front
payments and, in return, Olin will receive ethylene at co-investor,
integrated producer economics. The agreement is additive to the
financials outlined above for the chlorine value chain transaction.
The combined company will utilize an integrated supply of ethylene
from Dow’s production grid on the U.S. Gulf Coast to be a
sustainable, integrated chlor-vinyl producer. It will create scale
benefits to Dow, and Olin will contribute significant capital for
these rights. Together, both Dow and Olin will benefit from
long-term, sustainable physical integration, which is key to the
ongoing sustainable growth of both companies.
“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,” said
Andrew N. Liveris, Dow’s chairman and chief executive officer. “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 U.S.
shale gas economics, technology advantages, broader market access
and significant envelope integration.”
Liveris added, “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.”
“This transaction is a natural fit to our strategic objectives -
creating a sustainable, long-term growth platform and enhanced
shareholder and customer value,” said Joseph D. Rupp, Olin’s
chairman and chief executive officer. “Supported by significant
integration and scale, premier low-cost assets, an upgraded and
diversified product mix, and valuable network and other synergies,
we will be able to better serve and grow with our customers. We are
excited to combine the strengths of our businesses and capitalize
on the significant opportunities inherent in this transaction.”
Dow and Olin will have a strong, ongoing operational and
commercial relationship including several long-term supply, service
and purchase agreements which will support downstream products
aligned with Dow’s strategic market focus. Dow will be an important
anchor customer of Olin as it works to grow the acquired business.
Olin will have a strong capital structure and cash flow to support
growth and return of capital to shareholders. It will employ
approximately 6,000 employees at 29 operating sites in 9
countries.
Olin will continue to be led by Rupp and a senior management
team comprised of both Dow and Olin current employees. Olin’s Board
of Directors will consist of the existing nine Olin Company
directors and three new members to be designated by Dow.
The transaction is subject to approval by Olin shareholders and
completion of customary closing conditions, including relevant tax
authority rulings and regulatory approvals.
Dow and Olin will host a live Webcast to discuss this
announcement today at 9:00 a.m. ET on www.dow.com and
www.olin.com.
About Dow
Dow (NYSE: DOW) combines the power of science and technology to
passionately innovate what is essential to human progress. The
Company is driving innovations that extract value from the
intersection of chemical, physical and biological sciences to help
address many of the world's most challenging problems such as the
need for clean water, clean energy generation and conservation, and
increasing agricultural productivity. Dow's integrated,
market-driven, industry-leading portfolio of specialty chemical,
advanced materials, agrosciences and plastics businesses delivers a
broad range of technology-based products and solutions to customers
in approximately 180 countries and in high-growth sectors such as
packaging, electronics, water, coatings and agriculture. In 2014,
Dow had annual sales of more than $58 billion and employed
approximately 53,000 people worldwide. The Company's more than
6,000 products are manufactured at 201 sites in 35 countries across
the globe. References to "Dow" or the "Company" mean The Dow
Chemical Company and its consolidated subsidiaries unless otherwise
expressly noted. More information about Dow can be found at
www.dow.com.
About Olin Corporation
Olin Corporation is a manufacturer concentrated in three
business segments: Chlor Alkali Products, Chemical Distribution and
Winchester. Chlor Alkali Products, with eight U.S. manufacturing
facilities and one Canadian manufacturing facility, produces
chlorine and caustic soda, hydrochloric acid, hydrogen, bleach
products and potassium hydroxide. Chemical Distribution
manufactures bleach products and distributes caustic soda, bleach
products, potassium hydroxide and hydrochloric acid. Winchester,
with its principal manufacturing facilities in East Alton, IL and
Oxford, MS, produces and distributes sporting ammunition, law
enforcement ammunition, reloading components, small caliber
military ammunition and components, and industrial cartridges.
Use of non-GAAP measures: Dow’s management believes that
measures of income excluding certain items (“non-GAAP” measures)
provide relevant and meaningful information to investors about the
ongoing operating results of the Company. Such measurements are not
recognized in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) and should not be
viewed as an alternative to GAAP measures of performance.
Reconciliations of non-GAAP measures to GAAP measures are provided
in the Supplemental Information tables.
Note: The forward looking statements contained in this document
involve risks and uncertainties that may affect Dow’s and Olin’s
operations, markets, products, services, prices and other factors
as discussed in filings with the Securities and Exchange Commission
(“SEC”). These risks and uncertainties include, but are not limited
to, economic, competitive, legal, governmental and technological
factors. Accordingly, there is no assurance that the expectations
of either company will be realized. This document also contains
statements about Dow’s agreement to separate a substantial portion
of its chlor-alkali and downstream derivatives business, distribute
the business to Dow shareholders and then merge it with a
subsidiary of Olin (the “Transaction”). Many factors could cause
actual results to differ materially from these forward-looking
statements with respect to the Transaction, including risks
relating to the completion of the transaction on anticipated terms
and timing, including obtaining shareholder and regulatory
approvals, anticipated tax treatment, unforeseen liabilities,
future capital expenditures, revenues, expenses, earnings,
synergies, economic performance, indebtedness, financial condition,
losses, future prospects, business and management strategies for
the management, expansion and growth of the new combined company’s
operations, Olin’s ability to integrate the business successfully
and to achieve anticipated synergies, and the risk that disruptions
from the Transaction will harm Dow’s or Olin’s business. While the
list of factors presented here is considered representative, no
such list should be considered to be a complete statement of all
potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realization of forward
looking statements. Consequences of material differences in results
as compared with those anticipated in the forward-looking
statements could include, among other things, business disruption,
operational problems, financial loss, legal liability to third
parties and similar risks, any of which could have a material
adverse effect on Dow’s or Olin’s consolidated financial condition,
results of operations or liquidity. Neither Dow nor Olin assumes
any obligation to provide revisions to any forward looking
statements should circumstances change, except as otherwise
required by securities and other applicable laws.
Important Notices and Additional Information
In connection with the proposed transaction, Blue Cube Spinco
Inc. (“Spinco”) will file a registration statement on Form S-4/S-1
containing a prospectus and Olin will file a proxy statement on
Schedule 14A and a registration statement on Form S-4 containing a
prospectus with the SEC. INVESTORS AND SECURITY HOLDERS ARE ADVISED
TO READ THE REGISTRATION STATEMENTS/PROSPECTUSES AND PROXY
STATEMENT WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PARTIES AND THE PROPOSED
TRANSACTION. Investors and security holders may obtain a free copy
of the prospectuses and proxy statement (when available) and other
documents filed by Dow, Spinco and Olin with the SEC at the SEC's
web site at http://www.sec.gov. Free copies of these documents,
once available, and each of the companies’ other filings with the
SEC may also be obtained from the respective companies by directing
a written request to Olin at 190 Carondelet Plaza, Clayton, MO
63105. Attention: Investor Relations or Dow or Spinco at The Dow
Chemical Company, 2030 Dow Center, Midland, Michigan 48674,
Attention: Investor Relations.
This communication is not a solicitation of a proxy from any
investor or security holder. However, Olin, Dow, and certain of
their respective directors, executive officers and other members of
management and employees, may be deemed to be participants in the
solicitation of proxies from shareholders of Olin in respect of the
proposed transaction under the rules of the SEC. Information
regarding Olin’s directors and executive officers is available in
Olin’s 2014 Annual Report on Form 10-K filed with the SEC on
February 25, 2015, and in its definitive proxy statement for its
annual meeting of shareholders filed March 4, 2015. Information
regarding Dow’s directors and executive officers is available in
Dow’s Annual Report on Form 10-K filed with the SEC on February 13,
2015, and in its definitive proxy statement for its annual meeting
of shareholders, which is expected to be filed on March 27, 2015.
These documents can be obtained free of charge from the sources
indicated above. Other information regarding the participants in
the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the registration statements, prospectuses and proxy
statement and other relevant materials to be filed with the SEC
when they become available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
®TM Trademark of The Dow Chemical Company (“Dow”) or an
affiliated company of Dow
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For further information contact:The Dow Chemical
CompanyRebecca Bentley+1.989.638.8568rmbentley@dow.comorOlin
CorporationLarry
Kromidas+1.314.480.1452lpkromidas@olin.com
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