Dow Chemical strikes $5B chlorine deal with Olin
Dow Chemical Co. agreed to sell almost all of its chlorine business, the world’s largest, to Olin Corp. in a $5 billion deal as it pares less profitable products.
The transaction shifts assets generating $4.5 billion of annual revenue to Olin, whose investors will own 49.5 percent of the enlarged company. Shareholders of Midland-based Dow will hold a 50.5 percent stake once the deal is completed as expected by the year-end, the two companies said Friday in a statement.
The deal allows Dow Chairman and Chief Executive Officer Andrew Liveris to exceed his target of selling $7 billion to $8.5 billion of low-margin assets as he focuses on products such as genetically modified corn seed and plastics for autos and packaging. Dow was founded in 1897 as a producer of bleach, which is made from chlorine.
“This is Dow’s oldest business and our most commoditized business,” Jim Fitterling, a Dow executive vice president, said Friday by phone.
Shares of Dow, the largest U.S. chemical company, were up 3.9 percent at $48.25 at 8:51 a.m. while Olin gained 25 percent to $33.91.
Chlorine is made in tandem with caustic soda, known collectively as chlor-alkali, by running electricity through brine.
Olin, the North America oldest maker of chlorine, will now become the world’s largest producer, its CEO Joseph Rupp said in an interview. The Clayton, Missouri-based company, which also makes Winchester ammunition, has been investing in its chlorine business and was looking for a way to become a leader in the industry, he said. The deal increases the number of Olin’s chlor-alkali products to 18 from three, he said.
Winchester is a very profitable business and will be retained for at least two years following the Dow transaction, Rupp said.
The deal will be structured as a tax-efficient Reverse Morris Trust. Dow will receive $2 billion of cash and cash equivalents and an estimated $2.2 billion in Olin common stock. Olin also will assume about $800 million of pension and other liabilities.
Olin will get Dow’s chlor-alkali and vinyl assets on the U.S. Gulf Coast, its global chlorinated organics business and the global epoxy business. Dow will retain chlorine assets in Europe and Brazil and some capacity in Texas that’s integrated with the polyurethanes business, Fitterling said.
In a separate transaction, Dow agreed to supply Olin with ethylene from the U.S. Gulf Coast for 20 years.