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Corning (GLW) Says Dow Corning Ownership Restructuring Completed; Increases Shareholder Capital Allocation Expectations

June 1, 2016 7:38 AM EDT

Corning Incorporated (NYSE: GLW) announced that it has completed the previously announced strategic realignment of its ownership interest in Dow Corning Corporation. Corning has exchanged its 50% interest in Dow Corning for a newly formed company that holds approximately a 40% interest in Hemlock Semiconductor Group and $4.8 billion in cash. Corning received a private letter ruling from the Internal Revenue Service that supports the substantially tax-free nature of the transaction.

"The closing of this transaction unlocks significant value for Corning shareholders. The $4.8 billion in cash is the equivalent of approximately 30 times the annual equity earnings of Dow Corning's silicones business. The freedom to deploy that capital is a tremendous value driver for our shareholders," said Wendell P. Weeks, chairman, chief executive officer, and president.

"We thank the Dow Corning team for their contributions and wish them all of the best under the stewardship of Dow Chemical, which has assumed 100% ownership of Dow Corning," Weeks added.

Strategy and Capital Allocation Framework Update
"Corning's strategy and capital allocation framework defines our portfolio and underscores our commitment to excellent capital stewardship. Our strategy increases our return on innovation by focusing 80% of our resources on our three core technologies, four manufacturing and engineering platforms, and five market-access platforms. We sought the realignment of Dow Corning to increase our focus, and its completion is a significant milestone," said Weeks.

"We are delighted to be able to continue our ownership in Hemlock, a leading provider of polycrystalline silicon used in the manufacturing of semiconductor and solar devices. Our position in Hemlock allows us to capture the potential upside from a rebound in the solar market, while also providing market insight and access for our semiconductor-innovation programs," Weeks added.

R. Tony Tripeny, senior vice president and chief financial officer, remarked, "As 2016 unfolds, we see growth returning across several of our businesses and, longer term, we see prospects for innovation-driven growth. We expect continuing moderate sequential LCD glass-price declines and ongoing benefit from the new hedges we added to reduce our exposure to a weaker yen. We also look forward to welcoming Alliance Fiber Optic Products into the Corning family.

"In light of this progress and confidence in our future operating cash flows, we are increasing the cash we expect to distribute to shareholders to more than $12.5 billion. This increase in our projected cumulative cash returns to shareholders will more than offset the loss of equity earnings from Dow Corning's silicones business. This increase also underscores our commitment to capital stewardship, and we will fully deploy these funds consistent with our capital allocation plan," said Tripeny.

Between Sept. 30, 2015, and May 31, 2016, Corning returned approximately $3 billion to shareholders, repurchasing about 135 million shares, including an accelerated share repurchase completed in January, and raising the cash dividend by 12.5% in February.



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