Dow Closes Transaction to Separate Significant Portion of its Chlorine Value Chain

Transaction is highly accretive to Dow and Dow shareholders, with a tax-efficient consideration of greater than $4.6 billion or taxable equivalent value in excess of $7 billion to Dow and Dow shareholders.Dow reduces outstanding shares of its common stock by more than 34 million shares; returns $1.5 billion in value to shareholders through the split-off, effectively completing $6.5 billion of its $9.5 billion share repurchase program.Dow exceeds divestiture target – reaching $12 billion and further advancing the Company’s portfolio shift to select high-performance sectors.

MIDLAND, MI - 10/05/2015 -- The Dow Chemical Company (NYSE: Dow) ("Dow") today announced the successful closing of the previously announced split-off transaction, resulting in the separation of a significant part of Dow’s chlor-alkali and downstream derivatives businesses and merger of these businesses with Olin Corporation (NYSE: OLN) ("Olin") to create an industry leader with revenues approaching $7 billion.

Included are Dow’s U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics, and Global Epoxy business units, in addition to 100 percent interest in the Dow Mitsui Chlor-Alkali joint venture. The closing of the merger followed the expiration of the related exchange offer and the satisfaction of certain other conditions. As a result of the exchange offer, Dow will reduce outstanding shares of its common stock by more than 34 million shares or nearly 3 percent of outstanding common shares.

The transaction is highly accretive to Dow and Dow shareholders, with a tax-efficient consideration of greater than $4.6 billion on an after-tax basis and taxable equivalent value in excess of $7 billion.

With this transaction, Dow exceeds its prior stated goal to divest $7 billion to $8.5 billion of non-strategic businesses and assets by mid-2016, with the total now approaching more than $12 billion in pre-tax proceeds.

“This transaction not only achieves a milestone in exceeding our divestiture targets, it also marks a strategic step forward in Dow’s targeted portfolio actions to drive further margin expansion and increasing return on capital,” said Andrew N. Liveris, Dow’s chairman and chief executive officer. “This transaction has a deal structure designed to maximize total shareholder return and allows Dow to significantly reduce its share count and enhance its balance sheet. Dow remains firmly focused on cash flow, earnings growth and shareholder remuneration with large accretive divestments such as this deal and our soon-to-be-commissioned investments in Saudi Arabia and on the U.S. Gulf Coast being strong examples of this focus.”

The transaction has a tax-efficient consideration value of $4.6 billion, or taxable equivalent value in excess of $7 billion including $2.1 billion of a combination of cash and debt retirement, nearly $1.0 billion of assumed debt and pension and other liabilities assumed by Olin, in addition to an estimated $1.5 billion in Olin common stock (using the Olin stock value as of close on October 2, 2015) distributed to Dow stockholders in the exchange offer.

The split-off structure of the transaction allows Dow to return $1.5 billion in value to shareholders and increase earnings per share by using Splitco common stock in the exchange offer instead of cash. With $2 billion in share repurchases to date in 2015 and the closing of this split-off transaction, Dow has effectively completed $6.5 billion of previously committed shareholder-focused actions. In November 2014, Dow announced a new $5 billion tranche to its existing $4.5 billion share repurchase program, bringing the total program to $9.5 billion.

Preliminary Results of Exchange Offer

Dow shareholders had an opportunity to exchange their shares of Dow common stock for shares of common stock of Blue Cube Spinco Inc. (“Splitco common stock”), which automatically converted into the right to receive 0.87482759 shares of Olin common stock at the close of the transaction. The final exchange ratio was set at 2.9318 shares of Splitco common stock for each share of Dow common stock. As a result, Dow shareholders who tendered their shares of Dow common stock in the exchange offer received approximately 2.5648 shares of Olin common stock (subject to receipt of cash in lieu of fractional shares) for each share of Dow common stock exchanged and accepted by Dow.

Pursuant to the exchange offer, which expired on October 5, 2015 at 8:00 a.m., New York City time, Dow accepted 34,108,738 shares of Dow common stock in exchange for 100,000,000 shares of Splitco common stock owned by Dow.

Because more than 34,108,738 shares of Dow common stock were validly tendered and not properly withdrawn in the exchange offer, the exchange offer was oversubscribed and all shares of Splitco common stock owned by Dow were distributed in the exchange offer. As a result of the oversubscription, it was not necessary to distribute shares of Splitco common stock as a pro rata dividend. Because the exchange offer was oversubscribed, Dow announced a preliminary proration factor of 20.33 percent.

Ongoing Dow and Olin Relationship

Two individuals with historic ties to Dow―William H. Weideman, former Chief Financial Officer and Executive Vice President of Dow and Carol A. Williams, former Dow Executive Vice President of Manufacturing and Engineering, Supply Chain and Environmental, Health & Safety Operations― have been designated by Dow to serve along with the nine current directors on Olin’s Board in line with the transaction agreement between Dow and Olin announced on March 27, 2015. A third Dow designee will be announced at a later date. Olin will be led by a senior management team comprised of current Olin executives and former Dow leaders that transferred as part of the transaction.

Dow and Olin will have a strong, ongoing operational and commercial relationship, including several long-term, arms-length 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 Olin grows the acquired business, which will enable Dow to continue to benefit from its integration efficiencies in chlorine for key downstream applications.

This transaction also includes 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 of up to $1.2 billion and, in return, Olin will receive ethylene at co-investor, integrated producer economics.

Transaction Scope and Dow Impact
The separation transaction scope includes approximately 50 manufacturing facilities in 12 locations in all geographic regions and nearly 2,300 employees, which transitioned to Olin at transaction close:

U.S. Gulf Coast Chlor-Alkali and Chlor-Vinyl facilities in Plaquemine, Louisiana and Freeport, Texas, including 100 percent ownership interest in the Dow Mitsui Chlor-Alkali (DMCA) joint venture in Freeport, Texas, and Russellville, Arkansas;Global Chlorinated Organics production facilities in Freeport, Texas; Plaquemine, Louisiana; and Stade, Germany;The global Epoxy business, including assets in Freeport, Texas; Roberta, Georgia; Rheinmuenster, Germany; Pisticci, Italy; Baltringen, Germany; Stade, Germany; Terneuzen, The Netherlands; Gumi, South Korea; Zhangjiagang, China; and Guaruja, Brazil;Brine and select assets supporting operations in Freeport, Texas and Plaquemine, Louisiana; and energy operations in Freeport, Texas.
Dow retains its chlor-alkali and vinyl assets in Europe and Latin America for back-integration purposes.

Since 2013, Dow has completed transactions totaling $12 billion, including the sale of its Polypropylene Licensing & Catalysts business, ANGUS Chemical Company, AgroFresh business, and Sodium Borohydride business. This transaction is the latest in a series of actions that will further accelerate Dow’s value growth and productivity targets as the Company continues to shift its portfolio toward targeted, integrated high-value markets.

Please see Olin’s press release of October 5, 2015 for additional perspective on the transaction.

Source: http://www.dow.com/news/press-releases/dow%20closes%20transaction%20to%20separate%20significant%20portion%20of%20its%20chlorine%20value%20chain