Dow Chemical Company today announced it would be separating itself from a major portion of its chlorine operations, which represented more than $5 billion of annual revenue, 40 manufacturing plants at 11 sites, and more than 2,000 employees.
While Dow did not disclose exactly what the separation would look like, it noted that it has "retained financial advisors to explore all separation alternatives for these businesses, including potential ownership structures and partnerships such as joint ventures, spin-offs and divestitures." The reason behind the divestiture of the business is to allow the company to shift its focus to products and technologies that have higher margins and are often considered more valuable to its customers.
In a presentation outlining the transaction, Dow noted that it had divested a total of $10 billion in revenue since 2009, in an effort to have a deep and narrow focus that would allow it to invest in specific and attractive markets that are more associated with the trends in global growth.
Ultimately, the company believes these efforts will result in distinct business models that will in turn maximize the value available to shareholders.
The chlorine business is Dow's oldest, and it has been in the business for more than 100 years. The company highlighted that it would in turn focus on its performance plastics, electronic & functional materials, agricultural sciences and other businesses that are both quickly growing and deliver high returns.
"Today's announcement represents a continuation of the shift of our Company toward downstream high-margin products and technologies that customers value, and generate consistently higher returns than cyclical commodity products," said Dow's chief executive officer and chairman Andrew Liveris in a statement. "We are committed to prioritize our resources such that we maximize total shareholder return."
Liveris continued, "Separating these business units will allow us to further optimize the way they can be operated; and we believe different owners will be able to extract maximum value from these highly competitive assets and their related markets."
Dow noted that it anticipates it will complete the transactions related to the spinoff of these businesses within the next 12-24 months. Operations in the "carve-out" include those in Louisiana, Texas, Germany, Georgia, Italy, South Korea, China, and Brazil.
The article Dow Chemical Separating From Chlorine Operations originally appeared on Fool.com.Fool contributor Patrick Morris owns shares of The Dow Chemical Company. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.