Dow Chemical has agreed to buy the aniline facility of The Chemours Company (CC - Free Report) in Beaumont, TX, for roughly $140 million in cash. The completion of the transaction is subject to customary approvals and closing conditions.
As part of this deal, Chemours has also cut an agreement to meet Dow's additional aniline requirements with supply from its Pascagoula, MS plant. Chemours will continue to cater other aniline customers from its Pascagoula unit. The divestment, which represents another step in Chemours’ five-point transformation plan, will allow the company to focus more on businesses that have biggest market opportunities.
Chemours is a leading producer of the widely-used white pigment – titanium dioxide (TiO2). It started "regular-way" trading on the NYSE as an independent company on Jul 1, 2015 after being spun off from DuPont .
Chemours’ CEO Mark Vergnano noted that the acquisition of the aniline unit is a strategic fit for Dow as the company has been Chemours’ biggest aniline customer for many years.
Dow’s shares ticked up 0.3% to close at $53.32 last Thursday.
Dow saw a healthy jump in its profits in third-quarter 2015, helped by strong margins in its performance plastics business and lower raw material costs. The company is seeing growth across China, the U.S. and Europe in the upcoming quarters amid a challenging environment in other markets including Brazil.
Dow is expected to continue to gain from its productivity and growth actions. The company remains on track to deliver $1 billion of cost reduction under its three-year productivity program.
Moreover, Dow is selectively spinning off or selling its underperforming assets and gradually shifting to high-growth markets. The company, in Oct 2015, completed the separation of a major portion of its chlorine value chain and merger of those businesses with chemical maker Olin Corp. (OLN - Free Report) . The disposal of the chlorine assets represents a significant part of Dow's aggressive portfolio management actions.
Dow is a Zacks Rank #2 (Buy) stock.
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