Dow announces transaction to restructure ownership of Dow Corning Corporation

14 December 2015

The Dow Chemical Company has announced the signing of definitive agreements to restructure the ownership of Dow Corning Corporation. Unanimously approved by Dow’s board of directors, the transaction is highly complementary to the strategic objectives of Dow and offers significant potential to enhance value for shareholders.

Under the terms of the agreement, Dow will become the 100% owner of Dow Corning, currently a 50:50 JV between Dow and Corning. Dow and Corning will maintain their current equity stake in Hemlock Semiconductor Group.

With Dow and Dow Corning coming together, Dow will extend its participation in Consumer Solutions and Infrastructure Solutions segments by increasing Dow’s product offerings in several attractive end use applications such as building and construction, consumer care and automotive.

Dow is uniquely positioned to capture US$400M in run rate annual cost and growth synergies from the restructured ownership of Dow Corning. The transaction is expected to yield more than US$1bn in additional annual EBITDA at full run-rate synergies and is expected to be accretive to Operating EPS, cash flow from operations and free cash flow in the first full year after the close of the transaction.

The transaction structure enables Dow to maintain a net debt-to-equity ratio consistent with Q3 2015 levels (prior to the closing of the sale of Dow’s USA Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics, and Global Epoxy business units to Olin Corporation), in line with the Company’s focus of retaining an investment grade credit rating. The transaction is expected to close in the first half of 2016. Dow Corning’s corporate headquarters will remain in Auburn, Michigan.

"This transaction is another milestone aligned to Dow’s strategic agenda to provide clarity on our JVs and demonstrates our ongoing and relentless focus on creating shareholder value,” said Andrew N. Liveris, Dow’s chairman and CEO. "Today represents the transition of a very successful 72-year partnership between Dow and Corning and our strong relationship with Corning will continue through Hemlock Semiconductor. Dow is the natural owner of Dow Corning. Fully aligned to our portfolio strategy, the addition of a silicones position will expand our product offerings across multiple businesses while driving innovative solutions that will enable us to go deeper into key end markets by leveraging Dow’s existing, strong science and engineering competencies across new chemistries."

"Today’s announcement represents the next step in the evolution of our portfolio to drive higher, more stable earnings with a world leading silicone technology platform,” said Howard Ungerleider, Dow’s Vice Chairman and CFO. "It demonstrates our continued focus on investing in value streams that will deliver profitable growth aligned to high-margin end use markets."

The transaction is subject to customary closing conditions, including relevant tax opinions and regulatory approvals.

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