Dow to reduce 2,500 jobs globally; in line with Dow Corning integration

In line with Dow Chemical’s series of actions to achieve synergy and accelerate shareholder value from the restructuring of its ownership of the Dow Corning Corporation, it will shut down silicones manufacturing facilities in Greensboro, North Carolina, and Yamakita, Japan, as well as certain administrative, corporate and manufacturing facilities to further streamline costs associated with the transaction. These collective actions will result in a reduction of approximately 2,500 positions globally, or approximately 4% of Dow’s workforce.

Dow Corning’s silicones technology and product platform is said to bring 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 says it is uniquely positioned to capture US$500 million in combined run rate annual synergies as a result of the restructured ownership – consisting of US$400 million in cost synergies, an increase from the previously stated US$300 million target, and US$100 million in growth synergies – and expects to achieve US$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/CEO. “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 harmonising energy contracts at large sites, optimising 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.

The company will take a charge of approximately US$410 million to US$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% within 12 months of closing the Dow Corning transaction, and 100% within 24 months.

Dow says it will involve local stakeholders as defined in each country and in compliance with relevant information and consultation processes.