Dow Chemical to Separate Chlorine Assets

Dow Chemical Co., the largest U.S. chemical maker by sales, plans to separate chlorine-related assets including its epoxy business for possible sale as the company focuses on higher-margin activities.

The assets account for as much as $5 billion of annual sales and include plants at 11 sites in the U.S. and Europe, Asia and South America employing almost 2,000 people, Dow said today in a statement.

Like U.S. chemical producers DuPont Co. and Ashland Inc., Dow is selling or considering the sale of business lines as it attempts to unlock growth. Midland, Michigan-based Dow said in October it expected to get $3 billion to $4 billion from asset sales in the next 18 to 24 months.

The company said today it’s looking at options for the chlorine operations including sales, joint ventures and spinoffs. It expects to complete deals within two years. Dow has already received expressions of interest from potential buyers, Chairman and Chief Executive Officer Andrew N. Liveris said today in a phone interview.

Dow is the world’s largest maker of chlorine, which is used to make products including polyvinyl chloride, a plastic also known as PVC. The company plans to sell its chlorine-production capacity while holding on to downstream businesses that use the chemical as a raw material to make value-added products, such as 2,4-D, an herbicide tolerated by Dow’s genetically modified crops.

Energy Costs

“This is not a full exit from chlorine, it’s a full exit from the commodity part of chlorine,” Liveris said in the interview. “People who want access to the feedstock for their PVC business will be very interested in this.”

The U.S. chlorine assets are attractive because of their low energy costs compared with other parts of the world, he said. The market for epoxy, which is used to make products including plywood, is going through a “different dynamic” because excess capacity has been built in China and margins are being squeezed, Liveris said.

Liveris said Dow has been working with two banks on the separation of the chlorine assets. It’s in the process of formally appointing advisers on the potential sale.

The shares rose 2.4 percent to $39.98 at the close in New York.

Dow also said today it plans to shut down about 800,000 tons of chlorine and caustic-soda equivalent capacity in Freeport, Texas, and will replace it with supply from new capacity from a joint venture with Mitsui & Co. that’s expected to start up early next year.

Caustic soda is typically produced alongside chlorine, which is made by passing electricity through brine.

The shutdown is positive for other sellers of caustic soda, Charles Neivert, an analyst at Cowen & Co. in New York, said in a note. Axiall Corp., which is based in Atlanta, and Clayton, Missouri-based Olin Corp. both climbed as much as 11 percent in New York.

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