Dow-Chemical Co announced that it is going to spin off a portion of its chlorine business to Olin Corp, in a cash and stock deal worth $5 billion.
Dow shareholders will own 50.5 percent of Olin and the company will designate three directors to Olin’s board.
The Michigan-based company is moving away from chlorine as part of an effort to focus more on higher-margin products.
Olin will become the world’s largest producer of chloe-alkali after the sale is completed. Chlor-alkali is used to create caustic soda and chlorine, which are used in a range of industries such as automotive, healthcare, and textiles.
Activist investor Dan Loeb has been pressuring Dow-Chemical to sell its low-margin bulk chemicals businesses. An activist investor is a person or group that becomes a significant minority shareholder in a company and tries to influence its management.
The company first announced that it would be selling a portion of its chlorine business in 2013, stating that it would be shedding off at least $5 billion worth of low-margin businesses.
Dow Chemical Chief Executive Andrew Liveris said in a conference call with investors earlier that the deal shows how “Dow continues to behave as our own, best activist.”
He also said that there may be more deals over the next year as the company simplifies its joint ventures.
“JV conversations are ongoing right now and we are seeking the right strategic answers,”
Dow will be selling its chlorine in a “tax-efficient” way. It will receive $2 billion in cash and cash equivalents in addition to around $2.2 billion in Olin shares in a Reverse Morris Trust deal.
Under the deal Oline will assume $800 million of pension and liabilities and it will give Dow shareholders control of the firm.
Olin Chief Executive Joseph Rupp said that the combined business will be in a better position as the chlor-alkali market improves in North America.
The deal is expected to be completed by the year-end.
Dow’s financial advisers were Barclays Plc and Goldman Sachs Group Inc. and its legal counsel was Shearman & Sterling LLP. Olin’s financial adviser was JPMorgan Chase & Co. and its legal counsel was Cravath Swaine & Moore LLP.
