Dow Chemical splits specialty chemical business in US$5 billion deal

Global chemical supplier Dow Chemical is breaking off a significant part of its chlorine operations in a deal with chlorine and sodium hydroxide maker Olin Corp. valued at US$5 billion.

In a statement, Dow CEO and chairman Andrew Liveris said that the Olin deal has helped Dow exceed its target to divest US$7 billion to US$8.5 billion of non-strategic businesses and assets.

Midland, Mich.-based Dow said that it would join its chlor-alkali and downstream derivatives businesses with Olin Corp. in a cash-and-stock transaction. The transaction includes Dow’s U.S. Gulf Coast chlor-alkali and vinyl, global chlorinated organics and global epoxy businesses.

The deal includes US$2 billion of cash and cash equivalents to be paid to Dow; an estimated US$2.2 billion in Olin common stock; and about US$800 million of pension assumptions and other liabilities.

The new company is expected to have annual revenue of nearly US$7 billion.

Clayton, Mo.-based Olin said that it anticipates annual cost savings of at least US$200 million within three years. Joseph Rupp will remain as Olin’s CEO. Its board will include the existing nine Olin directors and three new members to be designated by Dow.

The deal is expected to close by the end of 2015.

Dow and Olin also announced a separate, 20-year long-term capacity rights agreement for the supply of ethylene by Dow to Olin.