Merger of Chlor-Alkali Business Dow to Spin–Off Assets and Create Create Chlorine Giant with Olin

Editor: Dominik Stephan

Dow gets serious with its plans to divest its chlorine products value chain and merge it with Olin: This billion dollar deal could create and industry leader with revenues approaching 7 billion dollar, analysts estimate.A new chlorine behemoth, in which Dow would hold the lion's share.

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(Picture: Dow)

Midland, Michigan/USA – The world’s second biggest chemical company will spin of a major part of its chlorine value chain and merge that new entity with Olin. The value asset is still a matter contracts and tax implications, but is estimated to be in the three to five billion-dollar-range.

During the last week, the boards of both Dow and Olin Corporation agreed on a multi-billion dollar merger proposal, under which Dow will separate its US Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, and then merge these businesses with Olin in a Reverse Morris Trust transaction. The merger will result in Dow shareholders receiving approximately 50.5 percent of the shares of Olin, with existing Olin shareholders owning approximately 49.5 percent.

A Five–Billion–Dollar Transaction

The transaction is valued at US $ 5 billion, and includes US $ 2.0 billion of cash and cash equivalents to be paid to Dow; an estimated US $ 2.2 billion in Olin common stock using the Olin stock value as of close on March 25, 2015; and approximately US $ 800 million of assumption of pension and other liabilities.

Following the completion of the transaction, Olin will be an industry leader in chlor-alkali and derivatives – benefiting from the combination of complementary businesses, significant scale, integration, cost-advantaged feedstocks, and a broad and diverse end-uses portfolio. Expected cost synergies of the transaction include network optimization which will facilitate output expansion, significant logistics savings and benefits, and the potential for expansion of existing products produced by Olin and Dow into additional geographies and to additional customers.

A Major Chlorine Player – Plus Major Savings for Shtreholders

Annual revenues of the combined business are anticipated to be approximately US $ 7 billion and EBITDA is expected to be US $ 1 billion on a 2014 pro forma basis, excluding synergies. The transaction is subject to a vote by Olin shareholders and is expected to close by year-end 2015.

The Reverse Morris Trust combines the spin-off of company assets with an acquisitive reorganization, thus allowing for a tax free transaction under US laws. Market experts estimate that this procedure could save the Dow shareholders around one billion in taxes in the transfer.