Major Chemical Reaction Dow Will Merge with Union Carbide

Article excerpt

DETROIT -- 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 billion deal announced yesterday 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.

The merged company, which will operate under the Dow Chemical name, will have $24 billion 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 chief executive 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 million 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 more than 3,000 people and injured 50,000 in the world's worst recorded industrial accident. Union Carbide paid a $470 million settlement in India's Supreme Court in 1989.

Dow Chemical is a half-owner of Dow Corning Corp., the former silicone breast implant manufacturer that has offered to pay $3.2 billion 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 chief executive. "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.

Under the deal, Union Carbide shareholders will receive 0.537 share of Dow Chemical for each of their Union Carbide shares -- or $66.96 based on Tuesday's closing price of Dow Chemical's stock. …