Dow Chemical sells chlorine business to Olin Corporation for $5 billion

Dow Chemical sells chlorine business to Olin Corporation for $5 billion

Dow Chemical Company has signed a $5 billion deal with Olin Corporation for the chlorine business of the company. Dow Chemical’s chlorine business is the largest chlorine operation in the world. Due to low margins, Dow Chemical management has been looking to divest its interest in the chlorine business. Dow Chemical stock was up by nearly 3 percent after the news was announced.

Dow shareholders will own 50.5 percent stake in the merged entity and rest of the stake will be owned by Olin Corporation shareholders. The combined entity will have $7 billion revenue. The deal will Olin will be conducted as a tax-efficient Reverse Morris Trust transaction.

Olin Corporation is expecting to save $200 million every year in cost cutting. After completion of the deal, Olin will be industry leader in chlor-alkali and derivatives.

In the last investor call, Dow Chairman and Chief Executive Officer Andrew Liveris had set a target of $7-8 billion in divestment. With $5 billion coming from chlorine segment, the company is all set to surpass the divestment target.

Announcing the deal, Dow CEO Liveris said, “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.”

With exit from the chlorine segment, Dow Chemical will focus on value-added products like plastics for automobiles & packaging, advantaged ethylene and propylene derivatives.

The partnership between Dow Chemical and Olin Corporation will lead to benefits from its integration efficiencies in chlorine for key downstream application.

Olin’s chairman and CEO Joseph D. Rupp said, “This transaction is a natural fit to our strategic objectives - creating a sustainable, long-term growth platform and enhanced shareholder and customer value.”

Olin Corporation stock jumped 14 percent after the deal was announced. The transaction is subject to approval by Olin shareholders.

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