The boards of directors of Dow Chemical of Midland, Michigan, and Olin Corporation of Clayton, Missouri, have unanimously agreed to a deal by which Dow will separate a significant portion of its chlor-alkali and downstream derivatives businesses and merge them with Olin in a transaction that creates an industry leader with revenues approaching $7 billion. The strategic relationship between Dow and Olin resulting from this transaction will enable Dow to continue to benefit from its integration efficiencies in chlorine for key downstream applications; Olin will expand its downstream portfolio of chlorinated products and benefit from the opportunity provided by low-cost ECU production on the U.S. Gulf Coast. The merger will result in Dow shareholders receiving approximately 50.5% of the shares of Olin, with existing Olin shareholders owning approximately 49.5%.
The transaction is valued at $5 billion.
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 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.
Annual revenues of the combined business are anticipated to be approximately $7 billion. The transaction is subject to a vote by Olin shareholders and is expected to close by year-end 2015.
In a separate, arms-length transaction, Dow and Olin agreed to a 20-year, long-term capacity rights agreement for the supply of ethylene by Dow to Olin, in which Dow will receive up-front payments and, in return, Olin will receive ethylene at co-investor, integrated producer economics. The combined company will use an integrated supply of ethylene from Dow’s production grid on the U.S. Gulf Coast to be a sustainable, integrated chlor-vinyl producer.
The transaction is subject to approval by Olin shareholders and completion of customary closing conditions, including relevant tax authority rulings and regulatory approvals. The deal expected to close by the end of the year.