Dow Chemical to buy Union Carbide

Aug 04, 1999 02:00 AM

The Dow Chemical Co., the maker of Styrofoam, is buying Union Carbide Corp., the leader in producing the chemicals used in making polyester and antifreeze.
The $ 9.3 bn deal announced would create the world's second-largest chemical business behind DuPont Co., strengthening Dow's perch in a sluggish chemical market beset by depressed prices due to a drop in demand in struggling overseas economies.
The merged company, which will operate under the Dow Chemical name, will have $ 24 bn in annual revenue, putting it ahead of the current No. 2, Germany's BASF AG, according to the most recent rankings by Chemical Week, a magazine covering the industry.
About 2,000 jobs will be cut as a result of the merger, leaving about 49,000 employees. Dow Chemical said the cuts would come through reduced hiring and attrition, but Dow Chemical President and CEO William S. Stavropoulos declined to be more specific about where the cuts might be made. The two companies said they expect the combination to save $ 500 mm a year. The merger would unite two companies that have faced crises.

A 1984 leak at Union Carbide's pesticide plant in Bhopal, India, killed 4,000 people and injured 50,000 in the world's worst recorded industrial accident. A court in Bhopal later ruled that exposure to the gas claimed thousands of additional lives over the years since the leak. Union Carbide paid a $ 470 mm settlement in India's Supreme Court in 1989.
Dow Chemical is a half-owner of Dow Corning Corp., the former silicone breast implant manufacturer which has offered to pay $ 3.2 bn to settle claims from 170,000 women who claim illnesses resulted from their implants. Dow Corning no longer makes breast implants. The merged company's corporate headquarters will remain in Midland, Mich., where Dow Chemical is based.
"This transaction is a giant step in our strategy to transform Dow into the world's most productive, best "value-growth" company in the chemical industry," Stavropoulos said. Dow is ranked third in the world in chemical sales and second in the United States.
Dow "is the ideal partner to move forward," said William Joyce, Union Carbide's chairman and CEO. "The new Dow is much, much stronger than either company has been in the past." Union Carbide is ranked 21st in the world in chemical sales and seventh in the United States.

The merger requires the approval of Union Carbide shareholders and U.S and European antitrust regulators. The companies said they expect the deal to be completed by the first quarter of 2000.

Source: The Associated Press
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