[DOW LOGO] [UNION CARBIDE LOGO]
DOW CHEMICAL AND UNION CARBIDE TO MERGE IN TRANSACTION VALUED AT $11.6 BILLION
CREATES LEADING GLOBAL CHEMICAL COMPANY WITH MAJOR GROWTH OPPORTUNITIES
MIDLAND, MICH. AND DANBURY, CONN. (AUGUST 4, 1999) -- The Dow Chemical Company
(NYSE: DOW) and Union Carbide Corporation (NYSE: UK) today announced that their
boards of directors have approved a definitive merger agreement for a tax-free,
stock-for-stock transaction. Under the agreement, Union Carbide shareholders
will receive 0.537 shares of Dow for each share of Union Carbide they own. Based
upon Dow's closing price of $124 11/16 on August 3, 1999, the transaction is
valued at $66.96 per Union Carbide share, or $11.6 billion in aggregate
including the assumption of $2.3 billion of net debt. The transaction is
expected to be accounted for as a pooling of interests and accretive to Dow's
earnings per share in the first year after closing.
The merger combines two of the industry's most technologically advanced global
companies, with combined annual revenues of over $24 billion, operating income
of $3 billion, a combined market capitalization of approximately $35 billion and
assets of over $30 billion. It creates the world's 2nd largest chemical company
overall, with leadership positions in both performance and basics businesses.
The combined company will operate in 168 countries, employ about 49,000 people
and rank number 50 on the Fortune 500.
William S. Stavropoulos, president and chief executive officer of Dow, said,
"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.
In phase one of our transformation, we improved and focused our portfolio,
became the lowest-cost producer, developed a more consistent earnings stream and
achieved financial flexibility. This made us a better company.
"In phase two, we are getting both better and bigger, including increased
productivity and higher growth in earnings per share. This merger 'jump starts'
the growth phase of our strategy. It immediately adds new performance businesses
as platforms for growth while strengthening the ones we already have. The merger
also gives us greater opportunities and higher cash generation from our basics
businesses. Together, our strengthened balanced sheet gives us the ability to
further invest in internal growth and acquisitions.
"Through our increased scale and geographic scope, we will be well positioned
for the next peak of the cycle with a broadened customer base across a wider
range of products and applications. Together, we are creating a global
corporation with the vision, management depth and technology leadership to reach
our ambitious financial goals, including annual EPS growth in excess of 10%
across the cycle," Stavropoulos added.
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"We are companies with similar cultures and a complementary fit. This merger
will draw upon the considerable talents of the employees of Union Carbide. A
joint transition team has been established to drive the rapid integration of the
two companies, combining the best practices and talent from each company to
create the preeminent chemical company in the world," said Stavropoulos.
William H. Joyce, chairman and chief executive officer of Union Carbide, said,
"This is the right move at a good time. In a consolidating chemical industry
where fewer, more powerful companies will exist, the combination of Dow and
Union Carbide now sets the gold standard for the industry. With its leading
technologies and outstanding facilities, the new Dow has even stronger long-term
prospects for profitable growth and enhancing shareholder value."
Joyce added, "Dow and Union Carbide are companies with similar cultures and
dedication to technology, to high productivity and to quality standards. Both
have long histories of commitment to their respective customers and employees,
as well as to Responsible Care(R) and the communities where we operate."
Since Dow's transformation began in 1993, the company has reduced structural
costs by $2.2 billion and divested over $10 billion of non-strategic businesses.
This included DowBrands, Destec, and Marion Merrell Dow. The company also added
$10 billion in new business assets -- $5 billion in new capacity additions and
$5 billion in acquisitions, the latter including Sentrachem, Buna Sow Leuna
Olefinverbund (BSL) and Mycogen. On August 2, the company announced an agreement
to purchase ANGUS Chemical Company, a leading specialty chemicals firm.
Dow and Union Carbide have proven track records of reducing costs. The companies
expect to achieve annual cost savings of at least $500 million by rationalizing
corporate structural costs, achieving procurement savings (including
feedstocks), and improving supply chain management. The scale and integration
achieved will significantly reduce per unit costs. Savings are expected to begin
upon closing and will be fully realized within two years, with about half in
year one. After the integration is completed, it is anticipated that the company
will have a workforce of approximately 49,000 employees, reflecting a reduction
of about 4% of the combined workforce. Dow will seek to minimize workforce
effects of the transaction through a combination of reduced hiring, attrition
and other measures.
William Joyce, chairman and chief executive officer of Union Carbide, will join
the Dow board of directors as vice chairman. In addition, one other member of
the Union Carbide board will join the Dow board, bringing the total number of
members to 17. Headquarters of the merged companies will be in Midland,
Michigan.
Prior to the completion of the merger, Dow will issue approximately 3.8 million
shares in order to qualify for pooling accounting treatment. Union Carbide
stockholders will own approximately 25% of Dow after the merger. The merger is
conditioned, among other things, upon the approval of Union Carbide
stockholders, and appropriate regulatory authorities. The companies anticipate
that the transaction will be completed early in the first quarter 2000.
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Goldman, Sachs & Co. acted as financial advisor and provided a fairness opinion
to Dow. Credit Suisse First Boston acted as financial advisor and provided a
fairness opinion to Union Carbide. Mayer, Brown & Platt is legal counsel to Dow
and Sullivan & Cromwell is legal counsel to Union Carbide.
Union Carbide is a worldwide chemicals company with advanced process
technologies and large-scale chemical production facilities.
o Specialties & Intermediates -- Union Carbide is the leading North American
supplier of solvents and intermediates to the paint and coatings industry;
the leading licensor of several technologies; and a leading supplier of
specialty chemicals, polymers and services used in the personal care
products, pharmaceuticals, automotive, wire and cable, oil and gas and
industrial lubricants industries.
o Basic Chemicals & Polymers -- Union Carbide is among the largest
manufacturers of polyethylene, the world's most widely used plastic, and
the technology leader in this industry; and a large manufacturer of
polypropylene, one of the world's fastest-growing, large-volume plastics.
Union Carbide is also the world's largest producer of ethylene oxide and
its derivative ethylene glycol, used for polyester fiber, resin and film,
automotive antifreeze and other products.
The Dow Chemical Company is a global science and technology-based company that
develops and manufactures a portfolio of chemical, plastic and agricultural
products and services for customers in 168 countries around the world. With
annual sales of more than $18 billion, Dow conducts its operations through 14
global businesses employing 39,000 people. The company has 123 manufacturing
sites in 32 countries and supplies more than 3,500 products.
This press release contains statements that are not historical facts and are
forward-looking. Forward-looking statements include among others, statement
relating to anticipated product plans, profitability, cost savings, revenue
growth and strategic plans and goals. Such statements involve risks and
uncertainties that could cause the company's results to differ materially from
what is projected, including without limitation risks and uncertainties relating
to: higher raw material costs or other expenses, increased competitive pricing
pressure or other increases in competition. Fluctuation in demand for the
company's products, currency fluctuations and the outcome of pending or future
litigation and claims including those relating to environmental laws and
regulations. In addition, the company's forward-looking statements could be
affected by general industry and market conditions and growth rates, general
domestic and international economic conditions. Further information can be found
in Dow's and Union Carbide's filings with the Securities and Exchange
Commission.
NOTE TO EDITORS: Today's news release, along with other news about Dow Chemical
and Union Carbide, is available on the Internet at: www.dow.com and
www.unioncarbide.com.
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CONTACT FOR DOW CHEMICAL COMPANY: CONTACT FOR UNION CARBIDE CORPORATION:
Name: Anne M. Ainsworth Name: Sean S. Clancy
Phone: (517) 636-3920 Phone: (203) 794-6976
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