Dow Chemical forced to merge its chlorine business with Olin Corp for $5 billion – MicroCap Observer

In a forced business deal that was transacted to save two partner businesses from keeling over, Dow Chemical Friday agreed to the sales of its chlorine business in a business deal that will merge it together with Olin Corp whose main investor Daniel Loeb has been putting pressure for the split.

Under the new deal, Dow Chemical receives $ 5 billion and another $ 2 billion cash since the operation was conducted as a Reverse Morris Trust transaction, and Olin Corporation will get nearly $ 7 from the business deal.

Dow Chemical will then have to release its United States Gulf Coast chlorine-alkali and vinyl, global epoxy and global chlorinated organics to enable it merge with Olin.

According to said Andrew Liveris, Dow's chief executive, "With this transaction, we will exceed our target to divest $ 7 billion to $ 8.5 billion of nonstrategic 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 deal appears to be result of months of agreement whereby Dow said it is adding four directors to the board so that the rift between the company and Third Point, a hedge fund managed by Loeb cold be resolved, instead of having a proxy war on its hands.

"Dow continues to behave as our own, best activist," Liveris said in a conference call with investors, saying that Loeb had always called for a split in the company to separate the plastics business from the petrochemical arm.

While this new arrangement allows Dow Chemicals to receive about $ 2 billion, the company and Olin will manage the $ 1.15 billion on ground. Dow also receives 50.5% of Olin stocks valued at $ 2.2 billion. However, Olin will be left with $ 800 million debts and pension claims that once confronted Dow.