Close

Dow Chemical (DOW) Commences Exchange to Spin Signifcant Portion of Chlorine Value Chain

September 2, 2015 4:03 PM EDT

Dow Chemical (NYSE: DOW) announced that it has commenced its exchange offer for the split-off of a significant portion of its chlorine value chain. The split-off transaction is the next step in the separation, from Dow, of its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses. The exchange offer provides Dow shareholders with the opportunity to exchange their shares of Dow common stock for shares of Blue Cube Spinco Inc. (“Splitco”) common stock, which will convert into shares of Olin common stock upon completion of the proposed transaction. The exchange is expected to be tax-free to participating Dow shareholders for U.S. federal income tax purposes.

“This landmark transaction is the latest in a series of milestones we have achieved that enables Dow to significantly exceed our collective divestiture targets, and enables Olin to create a premier chlor-alkali and derivatives company with the scope and capabilities to leverage long-term growth opportunities and generate significant shareholder value,” said Andrew N. Liveris, Dow’s chairman and chief executive officer. "This exchange offer is designed to maximize total shareholder return through the ability to own shares in the combined company, which is expected to benefit from substantial synergies and create significant benefits for customers."

Key elements of the exchange offer:

  • Dow is offering to exchange all shares of common stock of Blue Cube Spinco Inc. (“Splitco”), a wholly owned subsidiary of Dow, for shares of common stock of Dow that are validly tendered and not properly withdrawn.
  • Dow shareholders have the option to exchange all, some or none of their shares of Dow common stock for shares of Splitco common stock, subject to proration as described below. Shares of Splitco common stock will automatically convert into the right to receive 0.87482759 shares of Olin common stock at the closing of the merger of an Olin subsidiary with and into Splitco, which is expected to occur promptly after completion of the exchange offer.
  • Tendering Dow shareholders are expected to receive approximately $1.11 of Splitco common stock for every $1.00 of Dow common shares tendered and accepted in the exchange offer, subject to the upper limit described below.
  • Dow will determine the ratio at which shares of Dow common stock and Splitco common stock will be exchanged by reference to the simple arithmetic average of the daily volume-weighted average prices of shares of Dow common stock and Olin common stock on the New York Stock Exchange on each of three valuation dates at the end of the exchange offer.
  • Dow expects to issue 100,000,000 shares of Splitco common stock in the exchange offer. The number of shares of Dow common stock that will be accepted in the exchange offer will depend on the final exchange ratio and the number of shares of Dow common stock tendered.
  • The exchange offer and withdrawal rights are scheduled to expire at 8:00 a.m., New York City time, on October 1, 2015, unless the exchange offer is extended or terminated.
  • Splitco common stock will not be transferred to participants in this exchange offer; such participants will instead receive shares of Olin common stock in the Merger. No trading market currently exists or will ever exist for shares of Splitco common stock.

This exchange offer is designed to permit Dow shareholders to exchange their shares of Dow common stock for Splitco common stock (which will convert into shares of Olin common stock) at a 10% discount in value, calculated as set forth in the exchange offer materials sent to Dow shareholders, subject to an upper limit as described below. This discount means that tendering Dow shareholders are expected to receive approximately $1.11 of Splitco common stock for every $1.00 of Dow common stock tendered and accepted in the exchange offer, subject to an upper limit. The upper limit in the exchange offer will be 2.9318 shares of Splitco common stock equivalent to 2.5648 shares of Olin common stock (based on the 0.87482759 shares of Olin common stock into which each share of Splitco common stock will convert) for each share of Dow common stock tendered and accepted in the exchange offer.

If the upper limit is in effect, then the exchange ratio will be fixed at that limit and this exchange offer will be subject to a mandatory extension of two trading days following the originally contemplated expiration date, as described in the exchange offer materials sent to Dow shareholders.

The final exchange ratio determining the number of shares of Splitco common stock participating shareholders will receive for each share of Dow common stock accepted in the exchange offer will be announced in a press release no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date (unless the exchange offer is extended). The exchange offer will expire at 8:00 a.m., New York City time, on October 1, 2015, unless terminated or extended.

Immediately following the consummation of the exchange offer, a special purpose merger subsidiary of Olin named Blue Cube Acquisition Corp. (“Merger Sub”) will be merged with and into Splitco, and Splitco, as the surviving company, will become a wholly owned subsidiary of Olin (the “Merger”). In the Merger, each issued and outstanding share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock. Accordingly, shares of Splitco common stock will not be transferred to participants in the exchange offer; such participants will instead receive shares of Olin common stock in the Merger. No trading market currently exists or will ever exist for shares of Splitco common stock.

The exchange offer will be subject to proration if the exchange offer is oversubscribed, and the number of shares accepted in the exchange offer may be fewer than the number of shares tendered.

If the exchange offer is consummated but not fully subscribed, the remaining Splitco common shares owned by Dow will be distributed on a pro rata basis to Dow shareholders whose Dow common stock remains outstanding after the consummation of the exchange offer.

The transactions are subject to customary closing conditions, including Olin shareholder approval. Olin has scheduled a meeting of shareholders to be held on September 15, 2015, to approve the issuance of Olin common stock in the transaction. As a result of the exchange offer, the number of Dow’s outstanding shares will be reduced.

Immediately after the Merger, approximately 52.7 percent of the outstanding shares of Olin common stock are expected to be held by pre-Merger holders of Splitco common stock and approximately 47.3 percent of the outstanding shares of Olin common stock are expected to be held by pre-Merger holders of Olin common stock. The transaction is expected to have a tax efficient consideration of $5 billion, and a taxable equivalent value of $8 billion to Dow and Dow shareholders.

For more information about the proposed transaction, please visit Dow’s website at www.dow.com. For more information about Dow’s split-off exchange offer, please contact the information agent, Georgeson.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Corporate News, Guidance, Hot Corp. News, Management Comments, Spinoffs

Related Entities

Definitive Agreement