Dow Chemical Co. (NASDAQ:DOW) and Olin Corporation (NASDAQ:OLN) announced on Friday about their merger, in turn creating an industry in the Chlorine sector. Investors at Dow will now hold 50.5 percent of the company while the rest will be owned by Olin.
In the deal worth $5 billion, Dow will shift the production of chlorine to the smaller producer Olin. Dow Chief Executive Andrew N.Liveris expects to sell $7 billion to $8.5 billion of assets. The company is set to focus on production of value-added products like genetically modified corn seeds and plastics for autos and packaging. Olin will utilize Dow’s ethylene supply to become the industry leader in chlor-vinyl manufacturing.
“Our drive is to get better, not bigger,” said Liveris.
Dow stated that they were creating a premier company with the scope and capabilities to leverage long-term opportunities in the marketplace. The merger will make Dow, one of Olin’s biggest customers, along with financial support to the chemical maker. Olin is set to grow, with about 6,000 employees and 29 facilities across 9 countries.
Olin, North America’s oldest maker of chlorine, will issue $2 billion debt to finance the merger. The deal will triple Olin’s production to surpass the second-biggest producer Occidental Petroleum Corp. Olin expects to generate $20 million in annual cost saving within three years.
Olin’s shares rose by 14 percent to reach $31, the biggest since 2009, while Dow rose by 2.8 percent to reach $47.76. Dow had taken its decision to split the business in 2013, and in the following month investor Dan Loeb at Hedge fund Third Point LLC revealed that he owned a stake in the company. After the decision for separate business, Dow agreed in November to give Third Point two seats.
The deal, structured as a tax-efficient Reverse Morris Trust, is expected to be completed by 2015-end. Olin will claim $800 million of pension and other liabilities.[ Via ]