The Dow Chemical Co. (NYSE: DOW) announced Tuesday morning that it is cutting 2,500 jobs (4% of its workforce) as it integrates its recently completed acquisition of Corning Inc.’s (NYSE: GLW) 50% stake in Dow Corning. Dow paid $4.8 billion in cash and a 40% stake in chip maker Hemlock to buyout its long-time partner in silicone maker Dow Corning.
Dow said it expects to cut annual expenses by $500 million and add $1 billion to its annual EBITDA as a result of the acquisition. The company said it expects the transaction to add to earnings per share, cash flow from operation, and free cash flow in the first full year after the close.
The company plans to close silicones manufacturing facilities in North Carolina and Japan as well as other ancillary facilities. The jobs losses are expected to be completed over the next two years and Dow said it would take a second-quarter charge of $410 to $460 million related to asset impairments and other costs related to the closures.
All this is being done in preparation for Dow’s proposed $130 billion merger with E.I. du Pont de Nemours & Co. (NYSE: DD). A U.S. Securities and Exchange Commission (SEC) review is expected to be completed by the end of June.
Dow CEO and chairman Andrew Liveris said:
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. 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.
Dow’s shares are trading down about 1% Tuesday morning at $48.97 in a 52-week range of $35.11 to $57.10.