REVERSE MORRIS TRUST TRANSACTION (Notes)

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

REVERSE MORRIS TRUST TRANSACTION

On March 27, 2015, the Company and Olin Corporation ("Olin") announced the signing of definitive agreements under which (i) the Company will transfer, directly or indirectly, its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses ("chlorine value chain") into a new company ("Spinco"), (ii) the shares of Spinco will either be exchanged for shares of the Company pursuant to a public exchange offer, distributed to Dow shareholders as a dividend, or a combination thereof, and (iii) Spinco will merge with a wholly owned subsidiary of Olin. Upon completion of these transactions, Dow shareholders that receive shares of Spinco will own at least 50.5 percent of the outstanding shares of Olin common stock and existing Olin shareholders will hold the remaining outstanding shares of Olin common stock. As announced on March 27, 2015, the transaction has a value of approximately $5 billion, which includes approximately $2 billion in cash and Spinco debt instruments to be distributed to the Company by Spinco, approximately $800 million of assumed debt, pension and other liabilities, and approximately $2.2 billion in shares of Olin common stock to be received by participating Dow shareholders (valued based upon Olin's closing stock price on March 25, 2015). The Company will also enter into multiple site, transitional and other service agreements, supply and purchase agreements, real estate agreements, technology licenses and intellectual property agreements with Olin as a result of the transaction. The transaction is subject to Olin shareholder approval, customary regulatory approvals and tax authority rulings. The required waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 has expired and the transaction has received all required foreign regulatory clearances. On July 15, 2015, Dow received a favorable private letter ruling from the U.S. Internal Revenue Service with respect to the transaction. In addition, Spinco and Olin have filed registration statements on Form S-4 containing a prospectus - and Olin has filed a preliminary proxy statement on Schedule 14-A - with the U.S. Securities and Exchange Commission ("SEC") and are responding to comments from the SEC on these filings with both parties expected to file amendments to these filings before they become effective. The Company expects to close on this transaction early in the fourth quarter of 2015.

In the second quarter of 2015, the Company incurred pretax charges of $43 million ($18 million in the second quarter of 2014) and $69 million in the first six months of 2015 ($18 million in the first six months of 2014) for nonrecurring transaction costs associated with the planned separation of the chlorine value chain, consisting primarily of financial and professional advisory fees, legal fees and information systems infrastructure costs. These charges, which are part of costs associated with portfolio and productivity actions, were included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Corporate.

The Company has evaluated the pending divestiture of the chlorine value chain under Accounting Standards Update 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." In the quarter the transaction is completed, the Company does not expect to report the historical results of the chlorine value chain as discontinued operations in Dow's financial statements, as the divestiture of these businesses does not represent a strategic shift that will have a major effect on the Company's operations and financial results.