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$5 Billion 115-Year-Old Dow Chemical Chlorine Business to be Spun Off
Dow Chemical, a century-old business announced this morning a spin-off of their $5 billion chlorine derivatives business, an investment the company has made since the late 19th Century according to ABC news.
Investors prefer companies that are focused over diversified ones, looking kindly upon the ones that spin-out their under performing assets. (The Dow company’s stock was up 2.25% at 11:30am EST.) Another well known chemical company and competitor, DuPont, sold it’s performance coating unit for an estimated $4.9 billion last year, and it announced in October their commodity chemicals business would be spun off. In 2013 Dupont eclipsed Dow with it’s stock up 37.7% year to date against Dow’s 23.6% rise.
Even so, Dow always had a presence in the chlorine chain since a year after it’s founding, and the business has grown over the years to 40 manufacturing facilities around the world and employs 2,000 people. They don’t know how it will affect the 2,000 employees when they expect those deals to happen within the next one to two years. They generate $5 billion in sales and that accounts for just under the company’s 9% in total revenues.
The assets include its U.S. Gulf Coast chlor-vinyl facilities in Plaquemine, La., and Freeport, Texas, including Dow’s interest in the Dow Mitsui Chlor-Alkali joint venture in Freeport Texas.”Today’s announcement represents a continuation of the shift of our Company towards downstream high-margin products and technologies that customers value, and generate consistently higher returns than cyclical commodity products,” said Dow chairman and CEO Andrew Liveris in a statement.”These businesses have served us well over the decades, but are serving markets that Dow has exited over time, and we are therefore right-sizing our upstream integration to match the downstream focus that we started a decade ago.”
Dow already divested itself of $700 million this year, including an agreement they recently announced, to sell their global polypropylene licensing and catalysts business. In October, Liveris said the company wants to dispose of up to $4 billion in assets in the next coming 12-24 months. The chlorine spin-off represents an increase in that estimate.
Dow is joining a long list of companies that are spinning off under performing businesses. In 2012 ConocoPhillips spun off it’s refineries, pipelines and chemicals division. News Corp dispersed its publishing business from its movie and television enterprises this past summer. Time Warner is pursuing a similar move with it’s magazine next year. Nokia sold it’s handset business to Microsoft and a few years later Motorola made the same venture with Google.
Image Credit: New York Times
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