The Dow Chemical Company (NYSE: DOW):
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Dow to separate a significant portion of its chlor-alkali and
downstream derivatives businesses and merge them with Olin in a
tax-efficient Reverse Morris Trust transaction that creates an
industry leader with revenues approaching $7 billion; Dow shareholder
value will be further enhanced through the ownership of shares in the
combined company.
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Transaction is highly complementary to the strategic objectives of
both companies, with substantial synergies and significant potential
to enhance value for both sets of shareholders.
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Represents highly synergistic transaction with significant growth
opportunities; Olin expects to achieve annualized cost synergies of a
minimum of $200 million, which are anticipated to be fully realized
within 36 months.
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Transaction is highly accretive to Dow and Dow shareholders, with a
tax efficient consideration of $5 billion, and a taxable equivalent
value of $8 billion.
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Transaction is a significant achievement in executing Dow’s strategic
transformation to a focused provider of high value, differentiated
products based on key integrated and innovative value chains, such as
Dow’s advantaged ethylene and propylene derivatives.
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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.
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Olin will become a leading, low-cost global player in chlor-alkali and
derivatives while enhancing its existing presence in key geographies;
Olin will more than double its scale and drive incremental growth as a
result of the combined companies’ product and process technologies,
networks, logistics, creating substantial customer value.
The Dow Chemical Company (NYSE: DOW) and Olin Corporation (NYSE: OLN)
announced today that the boards of directors of both companies
unanimously approved a definitive agreement under which Dow will
separate a significant portion of its chlorine value chain and merge
that new entity with Olin in a transaction that will create an industry
leader with revenues approaching $7 billion. The transaction has a tax
efficient consideration of $5 billion, and a taxable equivalent value of
$8 billion to Dow and Dow shareholders. It is highly complementary to
the strategic objectives of both companies, with significant potential
to enhance value for both Dow and Olin shareholders, and create
substantial benefits for customers.
The terms of the agreement call for Dow to separate its U.S. 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.
The transaction is valued at $5 billion, and includes $2.0 billion of
cash and cash equivalents to be paid to Dow; an estimated $2.2 billion
in Olin common stock using the Olin stock value as of close on March 25,
2015; and approximately $800 million of assumption of pension and other
liabilities. In addition, by virtue of the joint share ownership, both
sets of shareholders will benefit from a minimum of $200 million in
projected annual synergies and cost savings.
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. Annual revenues of the combined business are anticipated to
be approximately $7 billion and EBITDA is expected to be $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.
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
agreement is additive to the financials outlined above for the chlorine
value chain transaction. The combined company will utilize an integrated
supply of ethylene from Dow’s production grid on the U.S. Gulf Coast to
be a sustainable, integrated chlor-vinyl producer. It will create scale
benefits to Dow, and Olin will contribute significant capital for these
rights. Together, both Dow and Olin will benefit from long-term,
sustainable physical integration, which is key to the ongoing
sustainable growth of both companies.
“By combining Dow’s world-class assets and people with Olin, we are
creating a premier company with the scope and capabilities to optimally
leverage long-term growth opportunities in the marketplace and generate
significant shareholder value,” said Andrew N. Liveris, Dow’s chairman
and chief executive officer. “We have jointly created a solid foundation
for success for Olin, driven by the benefits of greater scale, an
enhanced ability to capitalize on globally advantaged cost positions
backed by U.S. shale gas economics, technology advantages, broader
market access and significant envelope integration.”
Liveris added, “This milestone is a powerful shift in our portfolio
towards targeted, integrated high performance sectors and end-markets
that will drive further margin expansion, earnings growth, and return on
capital – with a deal structure designed to maximize total shareholder
return. With this transaction we will exceed our target to divest
$7 billion to $8.5 billion of non-strategic businesses and assets. This
achievement will allow us to have an ongoing focus to continue to
enhance shareholder remuneration, reduce debt and continue to invest in
future growth in our high priority and high margin businesses.”
“This transaction is a natural fit to our strategic objectives -
creating a sustainable, long-term growth platform and enhanced
shareholder and customer value,” said Joseph D. Rupp, Olin’s chairman
and chief executive officer. “Supported by significant integration and
scale, premier low-cost assets, an upgraded and diversified product mix,
and valuable network and other synergies, we will be able to better
serve and grow with our customers. We are excited to combine the
strengths of our businesses and capitalize on the significant
opportunities inherent in this transaction.”
Dow and Olin will have a strong, ongoing operational and commercial
relationship including several long-term supply, service and purchase
agreements which will support downstream products aligned with Dow’s
strategic market focus. Dow will be an important anchor customer of Olin
as it works to grow the acquired business. Olin will have a strong
capital structure and cash flow to support growth and return of capital
to shareholders. It will employ approximately 6,000 employees at 29
operating sites in 9 countries.
Olin will continue to be led by Rupp and a senior management team
comprised of both Dow and Olin current employees. Olin’s Board of
Directors will consist of the existing nine Olin Company directors and
three new members to be designated by Dow.
The transaction is subject to approval by Olin shareholders and
completion of customary closing conditions, including relevant tax
authority rulings and regulatory approvals.
Dow and Olin will host a live Webcast to discuss this announcement today
at 9:00 a.m. ET on www.dow.com
and www.olin.com.
About Dow
Dow (NYSE: DOW) combines the power of science and technology to
passionately innovate what is essential to human progress. The Company
is driving innovations that extract value from the intersection of
chemical, physical and biological sciences to help address many of the
world's most challenging problems such as the need for clean water,
clean energy generation and conservation, and increasing agricultural
productivity. Dow's integrated, market-driven, industry-leading
portfolio of specialty chemical, advanced materials, agrosciences and
plastics businesses delivers a broad range of technology-based products
and solutions to customers in approximately 180 countries and in
high-growth sectors such as packaging, electronics, water, coatings and
agriculture. In 2014, Dow had annual sales of more than $58 billion and
employed approximately 53,000 people worldwide. The Company's more than
6,000 products are manufactured at 201 sites in 35 countries across the
globe. References to "Dow" or the "Company" mean The Dow Chemical
Company and its consolidated subsidiaries unless otherwise expressly
noted. More information about Dow can be found at www.dow.com.
About Olin Corporation
Olin Corporation is a manufacturer concentrated in three business
segments: Chlor Alkali Products, Chemical Distribution and Winchester.
Chlor Alkali Products, with eight U.S. manufacturing facilities and one
Canadian manufacturing facility, produces chlorine and caustic soda,
hydrochloric acid, hydrogen, bleach products and potassium hydroxide.
Chemical Distribution manufactures bleach products and distributes
caustic soda, bleach products, potassium hydroxide and hydrochloric
acid. Winchester, with its principal manufacturing facilities in East
Alton, IL and Oxford, MS, produces and distributes sporting ammunition,
law enforcement ammunition, reloading components, small caliber military
ammunition and components, and industrial cartridges.
Use of non-GAAP measures: Dow’s management believes that measures of
income excluding certain items (“non-GAAP” measures) provide relevant
and meaningful information to investors about the ongoing operating
results of the Company. Such measurements are not recognized in
accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and should not be viewed as an alternative to
GAAP measures of performance. Reconciliations of non-GAAP measures to
GAAP measures are provided in the Supplemental Information tables.
Note: The forward looking statements contained in this document
involve risks and uncertainties that may affect Dow’s and Olin’s
operations, markets, products, services, prices and other factors as
discussed in filings with the Securities and Exchange Commission
(“SEC”). These risks and uncertainties include, but are not limited to,
economic, competitive, legal, governmental and technological factors.
Accordingly, there is no assurance that the expectations of either
company will be realized. This document also contains statements about
Dow’s agreement to separate a substantial portion of its chlor-alkali
and downstream derivatives business, distribute the business to Dow
shareholders and then merge it with a subsidiary of Olin (the
“Transaction”). Many factors could cause actual results to differ
materially from these forward-looking statements with respect to the
Transaction, including risks relating to the completion of the
transaction on anticipated terms and timing, including obtaining
shareholder and regulatory approvals, anticipated tax treatment,
unforeseen liabilities, future capital expenditures, revenues, expenses,
earnings, synergies, economic performance, indebtedness, financial
condition, losses, future prospects, business and management strategies
for the management, expansion and growth of the new combined company’s
operations, Olin’s ability to integrate the business successfully and to
achieve anticipated synergies, and the risk that disruptions from the
Transaction will harm Dow’s or Olin’s business. While the list of
factors presented here is considered representative, no such list should
be considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward looking statements. Consequences
of material differences in results as compared with those anticipated in
the forward-looking statements could include, among other things,
business disruption, operational problems, financial loss, legal
liability to third parties and similar risks, any of which could have a
material adverse effect on Dow’s or Olin’s consolidated financial
condition, results of operations or liquidity. Neither Dow nor Olin
assumes any obligation to provide revisions to any forward looking
statements should circumstances change, except as otherwise required by
securities and other applicable laws.
Important Notices and Additional Information
In connection with the proposed transaction, Blue Cube Spinco Inc.
(“Spinco”) will file a registration statement on Form S-4/S-1 containing
a prospectus and Olin will file a proxy statement on Schedule 14A and a
registration statement on Form S-4 containing a prospectus with the SEC.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE REGISTRATION
STATEMENTS/PROSPECTUSES AND PROXY STATEMENT WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PARTIES AND
THE PROPOSED TRANSACTION. Investors and security holders may obtain a
free copy of the prospectuses and proxy statement (when available) and
other documents filed by Dow, Spinco and Olin with the SEC at the SEC's
web site at http://www.sec.gov.
Free copies of these documents, once available, and each of the
companies’ other filings with the SEC may also be obtained from the
respective companies by directing a written request to Olin at 190
Carondelet Plaza, Clayton, MO 63105. Attention: Investor Relations or
Dow or Spinco at The Dow Chemical Company, 2030 Dow Center, Midland,
Michigan 48674, Attention: Investor Relations.
This communication is not a solicitation of a proxy from any investor
or security holder. However, Olin, Dow, and certain of their respective
directors, executive officers and other members of management and
employees, may be deemed to be participants in the solicitation of
proxies from shareholders of Olin in respect of the proposed transaction
under the rules of the SEC. Information regarding Olin’s
directors and executive officers is available in Olin’s 2014 Annual
Report on Form 10-K filed with the SEC on February 25, 2015, and in its
definitive proxy statement for its annual meeting of shareholders filed
March 4, 2015. Information regarding Dow’s directors and executive
officers is available in Dow’s Annual Report on Form 10-K filed with the
SEC on February 13, 2015, and in its definitive proxy statement for its
annual meeting of shareholders, which is expected to be filed on March
27, 2015. These documents can be obtained free of charge from the
sources indicated above. Other information regarding the participants in
the proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in the
registration statements, prospectuses and proxy statement and other
relevant materials to be filed with the SEC when they become available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
®TM Trademark of The Dow Chemical Company (“Dow”) or an
affiliated company of Dow
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