Olin, Dow Chemical finalize $5B merger of vinyls, chlor-alkali businesses
10/5/2015 12:00:00 AM
Dow Chemical today announced the successful closing of the previously-announced split-off transaction, resulting in the separation of a significant part of Dow’s chlor-alkali and downstream derivatives businesses and merger of these businesses with Olin.
The merged business will create an industry leader with revenues approaching $7 billion, according to project officials.
Included are Dow’s US Gulf Coast chlor-alkali and vinyl, global chlorinated organics, and global epoxy business units, in addition to 100% interest in the Dow Mitsui chlor-alkali joint venture.
The closing of the merger followed the expiration of the related exchange offer and the satisfaction of certain other conditions. As a result of the exchange offer, Dow will reduce outstanding shares of its common stock by more than 34 million shares, or nearly 3% of outstanding common shares.
The transaction is accretive to Dow and Dow shareholders, with a tax-efficient consideration of greater than $4.6 billion on an after-tax basis and taxable equivalent value in excess of $7 billion.
With this transaction, Dow exceeds its prior stated goal to divest $7 billion to $8.5 billion of non-strategic businesses and assets by mid-2016, with the total now approaching more than $12 billion in pre-tax proceeds.
“This transaction not only achieves a milestone in exceeding our divestiture targets, it also marks a strategic step forward in Dow’s targeted portfolio actions to drive further margin expansion and increasing return on capital,” said Andrew N. Liveris, Dow’s chairman and CEO.
“Dow remains firmly focused on cash flow, earnings growth and shareholder remuneration with large accretive divestments such as this deal and our soon-to-be-commissioned investments in Saudi Arabia and on the US Gulf Coast being strong examples of this focus," he added.
Ongoing Dow and Olin relationship
Two individuals with historic ties to Dow―William H. Weideman, former chief financial officer and executive vice president of Dow, and Carol A. Williams, former Dow executive vice president of manufacturing and engineering, supply chain and environmental, health and safety operations― have been designated by Dow to serve along with the nine current directors on Olin’s board in line with the transaction agreement between Dow and Olin A third Dow designee will be announced at a later date. Olin will be led by a senior management team comprised of current Olin executives, and former Dow leaders that transferred as part of the transaction.
Dow and Olin each say they will have a strong, ongoing operational and commercial relationship, including several long-term, arms-length 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 Olin grows the acquired business, which will enable Dow to continue to benefit from its integration efficiencies in chlorine for key downstream applications.
This transaction also includes 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 of up to $1.2 billion and, in return, Olin will receive ethylene at co-investor, integrated producer economics.
Transaction scope
The separation transaction scope includes approximately 50 manufacturing facilities in 12 locations in all geographic regions and nearly 2,300 employees, which transitioned to Olin at transaction close:
- US Gulf Coast chlor-alkali and chlor-vinyl facilities in Plaquemine, Louisiana and Freeport, Texas, including 100% ownership interest in the Dow Mitsui chlor-alkali (DMCA) joint venture in Freeport, Texas, and Russellville, Arkansas;
- Global chlorinated organics production facilities in Freeport, Texas; Plaquemine, Louisiana; and Stade, Germany;
- The global epoxy business, including assets in Freeport, Texas; Roberta, Georgia; Rheinmuenster, Germany; Pisticci, Italy; Baltringen, Germany; Stade, Germany; Terneuzen, The Netherlands; Gumi, South Korea; Zhangjiagang, China; and Guaruja, Brazil;
- Brine and select assets supporting operations in Freeport, Texas and Plaquemine, Louisiana; and energy operations in Freeport, Texas.
Dow retains its chlor-alkali and vinyl assets in Europe and Latin America for back-integration purposes.
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