MOSCOW (MRC) -- Dow Chemical Co will separate a portion of its century-old chlorine business and sell it to Olin Corp in a tax-efficient deal worth USD5 billion as part of efforts to shed low-margin assets, said the company in its press release.
The deal will make smaller rival Olin the world's largest producer of chlor-alkali, which is used to make chlorine and caustic soda. These chemicals are used in a variety of industries such as healthcare, textiles and automotive.
Shares of Dow Chemical, which will designate three directors to Olin's board, rose 3.3 percent to USD47.96 at mid-afternoon. Olin's shares jumped as much as 25 percent to USD33.91, a near 17-year high, valuing the company at about USD2.60 billion.
Dow, which had been pressured by activist investor Dan Loeb to break itself up, first announced plans to sell a bulk of its chlorine operations in 2013. The company averted a proxy fight with Loeb last November by agreeing to add four independent directors to its board.
Dow has turned its focus to more profitable businesses such as packaging, electronics and agriculture. Chief Executive Andrew Liveris said there could be more deals over the next 12 months as the company simplifies its joint ventures.
"JV conversations are ongoing right now and we are seeking the right strategic answers," he said. As part of the Olin deal, Dow will sell its U.S. Gulf Coast chlor-alkali and vinyl, global chlorinated organics and epoxy assets.
Dow will get USD2 billion in cash and cash equivalents and about USD2.2 billion in Olin shares in a Reverse Morris Trust deal, a transaction that allows a parent company to sell its unit in a tax-efficient manner.
Olin will assume USD800 million of pension and liabilities under the deal. The transaction will give Dow shareholders control of the combined company.
The deal, likely to close by 2015 end, will create a company with revenue of about USD7 billion and EBITDA of USD1 billion. The combined business will be better positioned as the chlor-alkali market in North America improves, Olin Chief Executive Joseph Rupp said on a conference call.
As MRC informed before, Dow Chemical Company signed a long-term agreement with a new wind farm, currently under development in South Texas by a subsidiary of Bordas Wind Energy, LLC, a joint venture between MAP and Enerverse, LLC.
Olin Corporation manufactures chemicals and ammunition products. The Company manufactures and sells chlorine, caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen, sodium chlorate, bleach products, and potassium hydroxide. Olin also manufactures products that include sporting ammunition, reloading components, small caliber military ammunition and industrial cartridges.
The Dow Chemical Company is an American multinational chemical corporation. As of 2007, it is the second-largest chemical manufacturer in the world by revenue (after BASF) and as of February 2009, the third-largest chemical company in the world by market capitalization (after BASF and DuPont). Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
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