Olin Corp. Should Trade At A Premium To Its Competition
Alpha Gen Capital
Alpha Gen Capital
Mar. 27, 2015, 3:27 PM
- In a dig at Third Point's Daniel Loeb, Dow Chemical (DOW +3.2%) CEO Andrew Liveris says his company's decisive move to shift out of the commodity chemicals business shows how “Dow continues to behave as our own best activist.”
- Dow's deal to sell its chlor-alkali business to Olin (OLN +18.2%) in exchange for $2B and a 50.5% stake in the smaller company will create the world’s largest chlorine producer with 5.7B tons/year of production and $1B in EBITDA.
- Citigroup’s P.J. Juvekar offers three reasons why the deal is good for shareholders: The chlor-alkali divestiture at 8x EBITDA is a great multiple for a commodity business, the Reverse Morris Trust deal makes it tax-free and a split-off will allow Dow to buy back its own shares efficiently - a similar move by PPG Industries was viewed very positively two years ago, and Dow will sell ethylene to OLN for 20 years and will receive an upfront payment of ~$400M.
- Dow may still get rid of its agricultural chemicals business, which does not have a lot in common with the rest of the business; with $7.3B in sales and almost $1B in EBITDA last year, the unit could be worth $10B.
- Juvekar says Axiall (AXLL +5%) also could benefit from the deal, seeing consolidation in the U.S. chlor-alkali industry as a positive, and OLN says it will look to optimize its expanded chlor-alkali asset base.
Mar. 27, 2015, 7:24 AM
- Dow Chemical (NYSE:DOW) says it will split off a major part of its chlorine business and merge it with Olin Corp. (NYSE:OLN) in a deal valued at $5B.
- The new entity, which will include Dow’s U.S. Gulf Coast chlor-alkali and vinyl, global chlorinated organics and epoxy businesses, is expected to have revenue of nearly $7B.
- The move comes as Dow faces criticism of its structure from the Third Point hedge fund, which has pressured Dow to break apart its petrochemicals business from its specialty chemicals segment.
- DOW +6.1%, OLN +4.8% premarket.
Jul. 18, 2012, 8:16 AM
Olin (OLN) agrees to acquire privately-held K. A. Steel Chemicals, one of North America's largest distributors of caustic soda, for $328M in cash. Olin expects the transaction to be immediately accretive to both earnings and cash flow.| Jul. 18, 2012, 8:16 AM