Dow to Cut 2,500
Company to Optimize Asset Footprint, Combine IT and R&D Systems and Consolidate Workforce, Among Other Actions
MIDLAND, Mich.–(BUSINESS WIRE)– The Dow Chemical Company (NYSE:DOW) today announced a series of actions to achieve synergy capture and accelerate shareholder value creation from the restructuring of its ownership of the Dow Corning Corporation.
Dow Corning’s silicones technology and product platform brings a highly complementary and growth-enabling new chemistry to Dow that is aligned to the Company’s strategy to go narrower and deeper in attractive industry segments where Dow is a leader today, such as building and construction, consumer care, transportation, packaging and electronics. Dow is uniquely positioned to capture $500 million in combined run rate annual synergies as a result of the restructured ownership – consisting of $400 million in cost synergies, an increase from the previously stated $300 million target, and $100 million in growth synergies – and expects to achieve $1 billion of additional annual EBITDA at full run-rate. The transaction will also be accretive to operating earnings per share, cash flow from operations and free cash flow in the first full year after transaction close.
“We are moving quickly and effectively to integrate Dow Corning and deliver the synergies that will drive new levels of value creation for our customers and generate even greater returns for our shareholders,” said Andrew N. Liveris, Dow’s chairman and chief executive officer. “With these difficult but necessary actions, we are bringing together the best of each company’s talent and technology, accelerating Dow’s strategy to go narrower and deeper into attractive, targeted market sectors, and setting the stage for the new Dow – the world’s leading material science company.”
Cost synergies will be achieved through a combination of workforce consolidations and savings from actions such as harmonizing energy contracts at large sites, optimizing warehouse and logistics footprints, implementing materials and maintenance best practices, combining information technology service structures and leveraging existing research and development (R&D) knowledge management systems.
Dow will shut down silicones manufacturing facilities in Greensboro, North Carolina, and Yamakita, Japan, as well as certain administrative, corporate and manufacturing facilities to further enhance competitiveness and streamline costs associated with the transaction.
These collective actions will result in a reduction of approximately 2,500 positions globally, or approximately four percent of Dow’s workforce.
The Company will take a charge of approximately $410 million to $460 million in the second quarter of 2016 for asset impairments, severance and other costs related to these measures, which are expected to be completed in the next two years.
These actions position Dow to achieve its cost synergy target run rate of 70 percent within 12 months of closing the Dow Corning transaction, and 100 percent within 24 months. In addition, the Company continues to progress efforts to capture significant growth opportunities driven by broader product offerings in key business areas, cross-selling opportunities and expanded R&D capabilities to commercialize innovations faster.
Dow will involve local stakeholders as defined in each country and in compliance with relevant information and consultation processes.