Dow To Separate Some Chlorine Value Chain, To Merge It With Olin In $5 Bln Deal

(RTTNews) - The Dow Chemical Co. (DOW) and Olin Corp. (OLN) said their boards of directors unanimously approved a definitive agreement for Dow to separate a significant portion of its chlorine value chain and merge that new entity with Olin in a transaction valued at $5 billion.

The deal 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, 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.

The deal is expected to create an industry leader with revenues approaching $7 billion, and EBITDA is expected to be $1 billion on a 2014 pro forma basis, excluding synergies. The transaction is expected to close by year-end 2015.

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.

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. Dow will receive up-front payments from this and, in return, Olin will receive ethylene at co-investor, integrated producer economics.