US Dow-Olin business targets $200m in synergies within 3 years

HOUSTON (ICIS)–The newly-created Dow-Olin chlor-alkali business announced on Friday aims to achieve $200m in synergies within three years – with potential upside to $300m, the top executives of the two US-based chemical firms said.

Dow and Olin earlier on Friday announced a $5bn deal under which Dow will separate its US Gulf coast chlor-alkali and vinyl and its global chlorinated organics and global epoxy businesses, and then merge these businesses with Olin, creating a “New Olin” with revenues of about $7bn.

During a conference call, the executives also said that New Olin was not likely to immediately follow competitor Axiall in exploring a tax-advantaged master limited partnership (MLP) structure for the chlor-alkali business.

The synergies will come from logistics and procurement ($50m), operational efficiencies ($70m), and asset optimisation ($80m), said Olin CEO Joseph Rupp, who will be leading New Olin.

He added that synergies could even reach $300m because of increased sales to new third-party customers and access to new product segments.

Rupp said that New Olin would be the world’s largest chlor-alkali producer, with leading positions in many chlorine derivatives.

The company will be the No 1 seller of merchant chlorine and industrial bleach in North America, and it will be the world’s largest supplier of epoxy materials, among other leadership positions, he said. Dow will be an important anchor customer of New Olin as it works to grow the acquired business.

As for a possible MLP structure, Rupp said that it would be premature to consider this at this time.

Also, the Reverse Morris Trust transaction Dow and Olin chose in creating New Olin imposed certain restrictions on changing the nature of assets in the next two years, he said.

He added that the MLP aspect had not played a role in the plans to create New Olin.

Dow CEO Andrew Liveris said that the separation of the chlor-alkali business marked a further “powerful shift” in Dow’s portfolio towards high-performing markets.

“[The deal] serves as another example of how Dow continues to behave as our own best activists,” he added with reference to activist investors’ pressuring chemical firms to reorganise.

Dow had announced in 2013 its intention to separate the business.