By Chelsey Dulaney
Dow Chemical Co. said Friday that it will split off a
significant portion of its chlorine business and merge it with Olin
Corp. in a deal valued at $5 billion.
Dow initially unveiled plans to carve out the business in
December 2013.
The new entity, which will include Dow's U.S. Gulf Coast
chlor-alkali and vinyl, global chlorinated organics and epoxy
businesses, is expected to have revenue of nearly $7 billion and
will be an industry leader, the companies said.
Shares of Dow surged 6.4% in premarket trading, while Olin
shares gained 4.8%.
After the merger is completed, Dow shareholders will hold about
50.5% of Olin, while Olin shareholders will own about 49.5%.
Dow will receive $2 billion in cash and about $2.2 billion in
Olin stock. The remaining $800 million reflects the assumption of
pension and other liabilities.
Olin, for its part, expects to save at least $200 million a year
as a result of its increased scale.
The move comes after Dow has faced criticism of its structure
from activist hedge fund Third Point LLC, which has pressured Dow
to break apart its petrochemicals business from its specialty
chemicals segment. Dow agreed in November to appease the firm by
adding two directors to its board who were proposed by Third Point,
along with two other independent directors who were favored by
Dow.
In a statement Friday, Dow Chief Executive Andrew Liveris said
the deal allows the company to exceed its target of divesting up to
$8.5 billion in non-strategic businesses.
The petrochemical maker has benefited from robust growth for its
plastics and other industrial products recently, offset in part by
price declines in Western Europe largely related to the impact of
the strong dollar. Languishing oil prices haven't yet cut into
Dow's earnings, but the company has said it isn't immune to
fuel-price swings or unfavorable exchange rates.
For its part, Olin saw a decline in chlorine and caustic soda
shipments, along with lower prices, for part of last year. But
Chief Executive Joseph Rupp said in February that the business is
expected to improve this year and called a trough to the cycle.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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