Dow Chemical's spinoff plans, chlor-alkali closures lift other chemical plays

|About: Dow Chemical Co. (DOW)|By:, SA News Editor

Investors applaud Dow Chemical's (DOW +2.9%) move to explore a spinoff or sale of its commodity chemical business - part of its original founding business from the late 19th century - which could generate up to $3B; it's part of Dow’s ongoing efforts to shift toward higher-margin products and technologies.

Dow already had divested itself of ~$700M YTD; CEO Andrew Liveris had said DOW was planning to dispose of up to $4B in assets over the coming 12-24 months, and the chlorine spinoff plan means an increase in that estimate.

The move will help the stock price and valuation over the next six to 12 months, Argus says, since Dow has tended to have a slightly lower valuation because investors want to see less of a commodity company and more of a specialized one.

North American chlor-alkali producers Axiall (AXLL +9.6%), Olin (OLN +7.5%) and Westlake Chemical (WLK +1.8%) are higher on Dow's plan to close 800K tons of caustic and chlorine capacity, which analysts see as a positive for merchant sellers of caustic as it offsets the new capacity from the Dow-Mitsui joint venture.