S-4/A 1 d921599ds4a.htm AMENDMENT NO. 4 TO FORM S-4 AMENDMENT NO. 4 TO FORM S-4
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 2, 2015

REGISTRATION NO. 333-203990

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 4

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

OLIN CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Virginia   190 Carondelet Plaza, Suite 1530
Clayton, Missouri 63105-3443
(314) 480-1400
  13-1872319
(State or other jurisdiction of
incorporation or organization)
    (I.R.S. Employer
Identification Number)

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

George H. Pain, Esq.

Senior Vice President, General Counsel and Secretary

Olin Corporation

190 Carondelet Plaza, Suite 1530

Clayton, Missouri 63105-3443

(314) 480-1400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

George F. Schoen, Esq.

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, New York 10019

(212) 474-1000

      George A. Casey, Esq.

Richard B. Alsop, Esq.

Heiko Schiwek, Esq.

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York 10022

(212) 848-7333

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable on or after the effective date of this registration statement and after all other conditions to the completion of the exchange offer and merger described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

Olin Corporation (“Olin”) is filing this registration statement on Form S-4 (Reg. No. 333-203990) to register shares of its common stock, par value $1 per share, which will be issued in the merger (the “Merger”) of Blue Cube Acquisition Corp., a Delaware corporation (“Merger Sub”), which is a wholly-owned subsidiary of Olin, with and into Blue Cube Spinco Inc. (“Splitco”), which is a wholly-owned subsidiary of The Dow Chemical Company (“TDCC”), whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin. The shares of Splitco common stock will be immediately converted into shares of Olin common stock in the Merger. Olin has filed a proxy statement that relates to the special meeting of shareholders of Olin to approve the issuance of shares of Olin common stock in the Merger and an amendment to Olin’s Amended and Restated Articles of Incorporation. In addition, Splitco has filed a registration statement on Form S-4 and Form S-1 (Reg. No. 333-204006) to register shares of its common stock, par value $0.001 per share, which common shares will be distributed to TDCC shareholders pursuant to a spin-off or a split-off in connection with the Merger.

TDCC is offering its shareholders the option to exchange their shares of TDCC common stock for shares of Splitco common stock in an exchange offer, which shares would immediately be converted into shares of Olin common stock in the Merger, resulting in a reduction in TDCC’s outstanding shares. If the exchange offer is undertaken and consummated but the exchange offer is not fully subscribed because less than all shares of Splitco common stock owned by TDCC are exchanged, the remaining shares of Splitco common stock owned by TDCC would be distributed on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of the exchange offer (the “clean-up spin”).


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The information in this document may change. The exchange offer and issuance of securities being registered pursuant to the registration statement of which this document forms a part may not be completed until the registration statement is effective. This document is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state where such offer or sale is not permitted.

 

SUBJECT TO COMPLETION

DATED SEPTEMBER 2, 2015

PRELIMINARY PROSPECTUS—OFFER TO EXCHANGE

THE DOW CHEMICAL COMPANY

Offer to Exchange All Shares of Common Stock of

BLUE CUBE SPINCO INC.

which are owned by The Dow Chemical Company

and will be converted into Shares of Common Stock of

OLIN CORPORATION

for

Shares of Common Stock of The Dow Chemical Company

 

 

The Dow Chemical Company (“TDCC”) is offering to exchange all shares of common stock of Splitco (“Splitco common stock”) owned by TDCC for shares of common stock of TDCC (“TDCC common stock”) that are validly tendered and not properly withdrawn. None of TDCC, Blue Cube Spinco Inc. (“Splitco”), Olin Corporation (“Olin”), any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in this exchange offer. You must make your own decision after reading this document and consulting with your advisors.

TDCC’s obligation to exchange shares of Splitco common stock for shares of TDCC common stock is subject to the satisfaction of certain conditions, including conditions to the consummation of the Transactions, which include approval by the shareholders of Olin of the issuance of shares of common stock of Olin (“Olin common stock”) in the merger and an amendment to Olin’s Amended and Restated Articles of Incorporation.

The Transactions are being undertaken to transfer the Dow Chlorine Products Business from TDCC to Olin. Immediately following the consummation of this exchange offer, a special purpose merger subsidiary of Olin named Blue Cube Acquisition Corp. (“Merger Sub”) will be merged with and into Splitco, and Splitco, as the surviving company, will become a wholly-owned subsidiary of Olin (the “Merger”). In the Merger, each issued and outstanding share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock. Accordingly, shares of Splitco common stock will not be transferred to participants in this exchange offer; such participants will instead receive shares of Olin common stock in the Merger. No trading market currently exists or will ever exist for shares of Splitco common stock. Immediately after the Merger, approximately 52.7 percent of the outstanding shares of Olin common stock are expected to be held by pre-Merger holders of Splitco common stock and approximately 47.3 percent of the outstanding shares of Olin common stock are expected to be held by pre-Merger holders of Olin common stock.

This exchange offer is designed to permit you to exchange your shares of TDCC common stock for a number of shares of Splitco common stock that corresponds to a 10 percent discount in value, calculated as set forth in this document, to the equivalent amount of Olin common stock based on the Merger exchange ratio set forth above.

The value of TDCC common stock and Splitco common stock (by reference to Olin common stock) will be determined by TDCC by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAP”) on each of the last three trading days of the exchange offer period (not including the expiration date) as it may be voluntarily extended, but not including the last two trading days that are part of any Mandatory Extension (as described below) (“Valuation Dates”), of TDCC common stock and Olin common stock on the New York Stock Exchange (“NYSE”). Based on an expiration date of October 1, 2015, the Valuation Dates are expected to be September 28, 2015, September 29, 2015, and September 30, 2015.

For each $1.00 of TDCC common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock, subject to an upper limit of 2.9318 shares of Splitco common stock per share of TDCC common stock. This exchange offer does not provide for a lower limit or minimum exchange ratio. If the upper limit is in effect, then the exchange ratio will be fixed at that limit and this exchange offer will be automatically extended (a “Mandatory Extension”) until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their TDCC common stock during that period. IF THE UPPER LIMIT IS IN EFFECT, UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU WILL ULTIMATELY RECEIVE LESS THAN $1.11 OF SPLITCO COMMON STOCK FOR EACH $1.00 OF TDCC COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

TDCC common stock is listed on the NYSE under the symbol “DOW.” Olin common stock is listed on the NYSE under the symbol “OLN.” On September 1, 2015, the last reported sale price of TDCC common stock on the NYSE was $41.66, and the last reported sale price of Olin common stock on the NYSE was $19.65. The market price of TDCC common stock and of Olin common stock will fluctuate prior to the completion of this exchange offer and therefore may be higher or lower at the expiration date than the prices set forth above.

THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 8:00 A.M., NEW YORK CITY TIME, ON OCTOBER 1, 2015, UNLESS THE OFFER IS EXTENDED OR TERMINATED. SHARES OF TDCC COMMON STOCK TENDERED PURSUANT TO THIS EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS EXCHANGE OFFER.

The terms and conditions of this exchange offer and the Transactions are described in this document, which you should read carefully.

In reviewing this document, you should carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 44 of this document.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus—Offer to Exchange is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus—Offer to Exchange is                     , 2015.


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This document incorporates by reference important business and financial information about TDCC and Olin from documents filed with the SEC that have not been included in or delivered with this document. This information is available at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find More Information; Incorporation by Reference.” You also may ask any questions about this exchange offer or request copies of the exchange offer documents from TDCC, without charge, upon written or oral request to TDCC’s information agent, Georgeson Inc., located at 480 Washington Blvd., 26th Floor, Jersey City, NJ 07310 or at telephone number (888) 566-8006. In order to receive timely delivery of the documents, you must make your requests no later than September 28, 2015.

If you are a participant in the Dow Chemical Company Employees’ Savings Plan, you may ask questions about this exchange offer with respect to the plan, without charge, upon written or oral request to the trustee of the trust established under the plan, Fidelity Management Trust Company, located at 245 Summer Street, Boston, MA 02210 or at telephone number 1-877-440-4015.

All information contained or incorporated by reference in this document with respect to Olin and Merger Sub and their respective subsidiaries, as well as information about Olin after the consummation of the Transactions, has been provided by Olin. All other information contained or incorporated by reference in this document with respect to TDCC, Splitco or their respective subsidiaries, or the Dow Chlorine Products Business, and with respect to the terms and conditions of the exchange offer has been provided by TDCC. This document contains or incorporates by reference references to trademarks, trade names and service marks, including ACRYSOL, ADSORBSIA, AFFINITY, AMBERJET, AMBERLYST, AQUASET, AQUCAR, AVANSE, BETAMATE, BIOBAN, DOW, DOWEX, EDI, ELITE, EVOQUE, FILMTEC, FORMASHIELD, FROTH-PAK, GREAT STUFF, HARVISTA, LIQUID ARMOR, NEPTUNE, NORDEL, OPTIPORE, POWERHOUSE, PRIMAL, RHOPLEX, RIPELOCK, SAFECHEM, SAFE-TAINER, SILVADUR, STYROFOAM, TAMOL, TEQUATIC, TERAFORCE, UNIPOL, WALOCEL, XENERGY, ARYLEX, BROADWAY, BRODBECK, CLINCHER, CLOSER, DAIRYLAND SEED, DITHANE, DURANGO, ENLIST, ENLIST DUO, FENCER, GARLON, HYLAND, ISOCLAST, LONTREL, LORSBAN, MILESTONE, MYCOGEN, N-SERVE, NEXERA, PANZER, PFISTER, PHYTOGEN, PRAIRIE BRAND SEEDS, PRIMUS, RADIANT, REFUGE ADVANCED, SENTRICON, SPIDER, STARANE, SURESTART, TELONE, TORDON, TRACER, TRANSFORM, and TRIUMPH, that are owned by TDCC and its related entities.

This document is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of TDCC common stock, Splitco common stock or Olin common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of Splitco common stock that may apply in their home countries. TDCC, Splitco and Olin cannot provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.


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TABLE OF CONTENTS

 

HELPFUL INFORMATION

     1   

QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

     5   

Questions and Answers About this Exchange Offer

     5   

Questions and Answers About the Transactions

     15   

SUMMARY

     21   

The Companies

     21   

The Transactions

     22   

Number of Shares of Splitco Common Stock to Be Distributed to TDCC Shareholders

     26   

Terms of this Exchange Offer

     26   

Debt Financing

     32   

Interests of Olin’s Directors and Executive Officers in the Transactions

     32   

Board of Directors and Management of Olin Following the Transactions

     32   

Shareholder Approvals

     32   

Accounting Treatment and Considerations

     32   

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

     33   

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

     36   

Summary Historical Combined Financial Data of the Dow Chlorine Products Business

     36   

Summary Historical Consolidated Financial Data of TDCC

     37   

Summary Historical Consolidated Financial Data of Olin

     38   

Summary Unaudited Pro Forma Condensed Combined Financial Data of Olin and the Dow Chlorine Products Business

     40   

Summary Comparative Historical and Pro Forma Per Share Data

     42   

Historical Common Stock Market Price and Dividend Data

     42   

RISK FACTORS

     44   

Risks Related to the Transactions

     44   

Other Risks that Relate to Olin Including the Dow Chlorine Products Business After the Consummation of the Transactions

     52   

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

     63   

THIS EXCHANGE OFFER

     65   

Terms of this Exchange Offer

     65   

Conditions for the Consummation of this Exchange Offer

     81   

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

     82   

Treatment of Specified TDCC Compensatory Equity-Based Awards Held by Current Splitco Employees

     85   

Fees and Expenses

     85   

Legal Limitations

     86   

Certain Matters Relating to Non-U.S. Jurisdictions

     86   

Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer

     86   

INFORMATION ON OLIN

     88   

Overview

     88   

Olin’s Business After the Consummation of the Transactions

     88   

Olin’s Liquidity and Capital Resources After the Consummation of the Transactions

     89   

Directors and Officers of Olin Before and After the Consummation of the Transactions

     90   

INFORMATION ON TDCC

     96   

Agricultural Sciences

     96   

Consumer Solutions

     96   

Infrastructure Solutions

     96   

Performance Materials & Chemicals

     96   

Performance Plastics

     97   

Directors and Officers of TDCC

     97   

 

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INFORMATION ON THE DOW CHLORINE PRODUCTS BUSINESS

     103   

General

     103   

Products

     103   

Manufacturing and Facilities

     104   

Sales and Distribution

     105   

Raw Materials and Energy

     106   

Research and Development

     106   

Seasonality

     106   

Competition

     106   

Environmental Regulation

     107   

Legal Proceedings

     107   

Employees

     107   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE DOW CHLORINE PRODUCTS BUSINESS

     108   

Overview

     108   

Separation of the Dow Chlorine Products Business from TDCC

     108   

Results of Operations

     109   

Segment Analysis

     111   

Liquidity and Capital Resources

     115   

Off-Balance Sheet Arrangements

     116   

Quantitative and Qualitative Disclosures About Market Risk

     116   

Contractual Obligations

     117   

Critical Accounting Estimates

     117   

SELECTED HISTORICAL FINANCIAL DATA

     119   

Selected Historical Combined Financial Data of the Dow Chlorine Products Business

     119   

Selected Historical Consolidated Financial Data of TDCC

     120   

Selected Historical Consolidated Financial Data of Olin

     121   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF OLIN AND THE DOW CHLORINE PRODUCTS BUSINESS

     123   

HISTORICAL PER SHARE DATA, MARKET PRICE AND DIVIDEND DATA

     141   

Comparative Historical and Pro Forma Per Share Data

     141   

Historical Common Stock Market Price and Dividend Data

     141   

Olin Dividend Policy

     142   

TDCC Dividend Policy

     142   

THE TRANSACTIONS

     143   

Determination of Number of Shares of Splitco Common Stock to Be Distributed to TDCC Shareholders

     147   

Background of the Transactions

     147   

Olin’s Reasons for the Transactions

     158   

Opinion of J.P. Morgan Securities LLC

     161   

Certain Financial Projections

     172   

TDCC’s Reasons for the Transactions

     175   

Olin’s Shareholders’ Meeting

     176   

Interests of TDCC’s and Splitco’s Directors and Executive Officers in the Transactions

     176   

Interests of Olin’s Directors and Executive Officers in the Transactions

     177   

Accounting Treatment and Considerations

     184   

Regulatory Approvals

     185   

Federal Securities Law Consequences; Resale Restrictions

     185   

No Appraisal or Dissenters’ Rights

     185   

THE MERGER AGREEMENT

     186   

The Merger

     186   

Closing; Effective Time

     186   

Merger Consideration

     186   

 

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Distribution of Per Share Merger Consideration

     187   

Treatment of TDCC Equity Awards

     188   

Distributions With Respect to Shares of Olin Common Stock After the Effective Time of the Merger

     188   

Termination of the Exchange Fund

     188   

Post-Closing Olin Board of Directors and Officers

     188   

Shareholders’ Meeting

     188   

Representations and Warranties

     189   

Conduct of Business Pending the Merger

     191   

Tax Matters

     195   

SEC Filings

     195   

Regulatory Matters

     195   

No Solicitation

     196   

Board Recommendation

     198   

Financing

     199   

Debt Exchange

     200   

Non-Solicitation of Employees

     200   

Certain Other Covenants and Agreements

     201   

Conditions to the Merger

     201   

Termination

     203   

Termination Fee and Expenses Payable in Certain Circumstances

     204   

Specific Performance

     205   

Amendments

     205   

THE SEPARATION AGREEMENT

     206   

Overview

     206   

Separation of the Dow Chlorine Products Business

     206   

Contribution

     210   

Issuance of Splitco Common Stock, Incurrence of Debt, Splitco Securities and Special Payment

     211   

Distribution

     211   

Conditions to the Distribution

     211   

Mutual Releases and Indemnification

     211   

Environmental Provisions

     212   

Working Capital Adjustment

     213   

Covenants

     213   

Termination

     214   

Third-Party Beneficiary; Amendment and Waiver

     214   

DEBT FINANCING

     215   

Overview

     215   

New Credit Facilities

     215   

Sumitomo Credit Agreement

     217   

Splitco Securities

     218   

Debt Exchange

     218   

Other Senior Debt Securities of Splitco

     218   

Senior Unsecured Bridge Facility

     219   

OTHER AGREEMENTS

     221   

Employee Matters Agreement

     221   

Tax Matters Agreement

     223   

Other Ancillary Agreements

     224   

DESCRIPTION OF SPLITCO COMMON STOCK

     229   

DESCRIPTION OF OLIN CAPITAL STOCK

     230   

General

     230   

Common Stock

     230   

Preferred Stock

     230   

 

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Certain Anti-Takeover Effects of Provisions of Virginia Law, the Olin Charter and the Olin Bylaws

     231   

Listing

     232   

Transfer Agent

     232   

OWNERSHIP OF TDCC COMMON STOCK

     233   

OWNERSHIP OF OLIN COMMON STOCK

     234   

COMPARISON OF RIGHTS OF HOLDERS OF TDCC COMMON STOCK AND OLIN COMMON STOCK

     236   

Authorized Capital Stock

     236   

Comparison of Rights of Shareholders

     237   

Certain Anti-Takeover Effects of Provisions of Virginia Law, the Olin Charter and the Olin Bylaws

     242   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     243   

LEGAL MATTERS

     243   

EXPERTS

     243   

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

     243   

INDEX TO FINANCIAL PAGES

     F-1   

 

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HELPFUL INFORMATION

In this document:

 

    “Above Basis Amount” means $2,030 million less the Below Basis Amount, subject to a possible adjustment based on Splitco’s working capital in accordance with the terms of the Separation Agreement;

 

    “ASC” means the Financial Accounting Standards Board Accounting Standards Codification;

 

    “Below Basis Amount” means $875 million, subject to increase or decrease if elected by TDCC in accordance with the terms of the Separation Agreement, but not more than $1,050 million without the consent of Olin;

 

    “Bridge Commitment Letter” means the bridge commitment letter dated March 26, 2015, among JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Wells Fargo Bank, N.A., Wells Fargo Securities, LLC and Olin;

 

    “Charter Amendment” means the proposed amendment to the Olin Charter to increase the number of authorized shares of Olin common stock from 120,000,000 to 240,000,000;

 

    “CIP Shares” means TDCC common stock in uncertificated form held through Computershare CIP, a dividend reinvestment plan for TDCC common stock maintained by Computershare Trust Company, N.A.

 

    “Code” means the Internal Revenue Code of 1986, as amended;

 

    “Commitment Letters” means, collectively, the Bridge Commitment Letter and the Commitment Letter dated March 26, 2015, among JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Wells Fargo Bank, N.A., Wells Fargo Securities LLC and Olin;

 

    “Commitment Parties” means, collectively, JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Wells Fargo Bank N.A. and Wells Fargo Securities, LLC, together with all additional lenders added to the Commitment Letters;

 

    “Contribution” means the contribution by TDCC, directly or indirectly, of the equity interests in the DCP Subsidiaries to Splitco pursuant to the Separation Agreement;

 

    “Daily VWAP” means the daily volume-weighted average price, and considering prices observed on the NYSE, with respect to TDCC, the Bloomberg command is “DOW UN <Equity> VAP” and with respect to Olin, the Bloomberg command is “OLN UN <Equity> VAP”;

 

    “DCP Subsidiaries” means the newly-formed direct and indirect subsidiaries of TDCC that will hold the transferred assets and certain assumed liabilities related to DCP following the Separation and will be contributed to Splitco prior to the consummation of the Distribution, pursuant to the Contribution;

 

    “Debt Exchange” means the transfer of the Splitco Securities by TDCC on or about the closing date of the Merger to investment banks and/or commercial banks in exchange for existing TDCC debt as described in the section of this document entitled “Debt Financing—Debt Exchange”;

 

    “Distribution” means the distribution by TDCC of its shares of Splitco common stock to the holders of shares of TDCC common stock by way of an exchange offer and, with respect to any shares of Splitco common stock that are not subscribed for in the exchange offer, a pro rata distribution to the holders of shares of TDCC common stock;

 

    “Dow Chlorine Products Business” or “DCP” means TDCC’s U.S. chlor-alkali and vinyl, global epoxy and global chlorinated organics business, including TDCC’s equity interests in the JV Entity;

 

    “Dow Savings Plan” means The Dow Chemical Company Employees’ Savings Plan, as may be amended from time to time;

 

    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended;

 

    “Exchange Act” means the Securities Exchange Act of 1934, as amended;

 

    “GAAP” means generally accepted accounting principles in the United States;

 

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    “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

 

    “JV Entity” means Dow-Mitsui Chlor-Alkali LLC, a joint venture between TDCC and Mitsui & Co. Texas Chlor-Alkali, Inc. For more information about the transfer of TDCC’s interest in the JV Entity to Splitco, see “The Separation Agreement—Separation of the Dow Chlorine Products Business—Transfer of the JV Entity Interests”;

 

    “JV Partner” means Mitsui & Co. Texas Chlor-Alkali, Inc.;

 

    “Merger” means the combination of Olin’s business and the Dow Chlorine Products Business through the merger of Merger Sub with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and as a wholly-owned subsidiary of Olin, as contemplated by the Merger Agreement;

 

    “Merger Agreement” means the Agreement and Plan of Merger, dated as of March 26, 2015, among TDCC, Splitco, Olin and Merger Sub;

 

    “Merger Sub” means Blue Cube Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Olin;

 

    “New Credit Facilities” means, collectively, the Olin Credit Facilities and the Splitco Term Facility, in each case as defined in the section of this document entitled “Debt Financing—New Credit Facilities”;

 

    “New Term Facilities” means, collectively, the Olin Term Facility and the Splitco Term Facility, in each case as defined in the section of this document entitled “Debt Financing—New Credit Facilities”;

 

    “NYSE” means The New York Stock Exchange;

 

    “Olin” means Olin Corporation, a Virginia corporation, and, unless the context otherwise requires, its subsidiaries including, after the consummation of the Merger, Splitco and the DCP Subsidiaries;

 

    “Olin Charter” means the Amended and Restated Articles of Incorporation of Olin;

 

    “Olin common stock” means the common stock, par value $1 per share, of Olin;

 

    “Other Splitco Debt Securities” means other senior debt securities, term loans or a combination thereof that Splitco expects to issue and sell as described in the section of this document entitled “Debt Financing”;

 

    “Private Letter Ruling” means a private letter ruling from the IRS including rulings substantially to the effect that (a) the continuing arrangements between TDCC and Splitco will not preclude TDCC and Splitco from satisfying the active trade or business requirement of Section 355(a) of the Code; (b) the receipt of Olin stock by a TDCC shareholder will be treated for federal income tax purposes as if the TDCC shareholder received Splitco common stock in the Distribution and exchanged such Splitco stock for Olin stock in the Merger; (c) the sale of fractional shares in the market will not be treated as acquisitions that are part of a plan that includes the Distribution for purposes of Section 355(e); (d) TDCC will not recognize gain or loss on the receipt of the Special Payment under Section 361(b)(3) of the Code (it being understood that the Special Payment does not include any additional cash distributed pursuant to the Merger Agreement and the Separation Agreement); (e) unless TDCC shall have elected to receive cash from Splitco in lieu of the Splitco Securities, as described below under “The Merger Agreement—Debt Exchange,” TDCC will not recognize gain or loss upon the Debt Exchange under Section 361(c) of the Code; (f) TDCC will not recognize gain under Section 357(c) of the Code in the Contribution and the Distribution; and (g) such additional or supplemental tax rulings material to TDCC’s tax treatment of the Separation or Merger as have been or will be requested by TDCC subject to the prior written consent of Olin (not to be unreasonably withheld, conditioned or delayed);

 

    “SEC” means the U.S. Securities and Exchange Commission;

 

    “Securities Act” means the Securities Act of 1933, as amended;

 

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    “Separation” means the transfer by TDCC to Splitco or the DCP Subsidiaries directly or indirectly of the transferred assets and certain assumed liabilities related to DCP pursuant to the Separation Agreement;

 

    “Separation Agreement” means the Separation Agreement, dated as of March 26, 2015, between TDCC and Splitco;

 

    “Share Issuance” means the issuance of shares of Olin common stock to the shareholders of Splitco in the Merger;

 

    “Special Payment” means the cash payment to be made in connection with the Transactions by Splitco to TDCC in an amount equal to the Below Basis Amount;

 

    “Splitco” means Blue Cube Spinco Inc., a Delaware corporation, and prior to the Merger, a wholly-owned subsidiary of TDCC;

 

    “Splitco common stock” means the common stock, par value $0.001, of Splitco;

 

    “Splitco Securities” means nonconvertible debt instruments in a principal face amount equal to the Above Basis Amount (subject to increase to account for customary underwriting fees) that Splitco will issue to TDCC (unless TDCC elects to receive cash from Splitco in lieu of the Splitco Securities), that TDCC thereafter expects to exchange for existing debt obligations of TDCC in the Debt Exchange, and that will be the debt obligations of Splitco, and are expected to be guaranteed by Olin after the consummation of the Merger;

 

    “Sumitomo Term Facility” means the term facility under the Sumitomo Credit Agreement, as defined in the section of this document entitled “Debt Financing—Sumitomo Credit Agreement”;

 

    “Tag Event” means the exercise by the JV Partner prior to the closing date of the Merger of its right to transfer all of its equity interests in the JV Entity to TDCC or TDCC’s designee in connection with the Transactions pursuant to the organizational documents of the JV Entity;

 

    “Tax Matters Agreement” means the Tax Matters Agreement, dated as of March 26, 2015, among Olin, TDCC and Splitco;

 

    “TDCC” means The Dow Chemical Company, a Delaware corporation, and, unless the context otherwise requires, its subsidiaries, which, after consummation of the Distribution, will not include Splitco and the DCP Subsidiaries;

 

    “TDCC common stock” means the common stock, par value $2.50 per share, of TDCC;

 

    “TDCC RMT Tax Opinion” means an opinion from Shearman & Sterling LLP, tax counsel to TDCC, as to the tax-free status of the Separation, Contribution, Distribution and Merger, including that (i) the Separation, Contribution and Distribution will constitute a “reorganization” within the meaning of Section 368(a) of the Code and each of TDCC and Splitco will be a party to the reorganization within the meaning of Section 368(b) of the Code, (ii) TDCC will not recognize a gain or loss for U.S. federal income tax purposes in connection with the receipt of the Splitco Securities under the Separation Agreement and the Debt Exchange, and (iii) the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and each of TDCC and Splitco will be a party to the reorganization within the meaning of Section 368(b) of the Code;

 

    “TDCC shareholders” means the holders of TDCC common stock;

 

    “TDCC Stock Fund” means, collectively, the Dow Stock Fund and the LESOP Stock Fund, as such terms are defined in the Dow Savings Plan, which are unitized investment funds invested exclusively in shares of TDCC common stock except for such amounts of cash, securities or other property as are necessary for liquidity purposes, subject to such limits on cash and short-term investments as are set forth in the Dow Savings Plan;

 

   

“Transaction Documents” means the Separation Agreement, the Merger Agreement, the Employee Matters Agreement and the Tax Matters Agreement, as well as the Additional Agreements and the

 

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Local Conveyances (as described under “The Separation Agreement—Separation of the Dow Chlorine Products Business—Local Conveyances and Additional Agreements”), each of which have been entered into or will be entered into in connection with the Transactions;

 

    “Transactions” means the transactions contemplated by the Merger Agreement and the Separation Agreement, which provide for, among other things, the Separation, the Contribution, the Distribution and the Merger, as described in the section of this document entitled “The Transactions”;

 

    “Trust” means any trust established under the Dow Savings Plan that holds shares of TDCC common stock;

 

    “Trustee” means the trustee of the Trust;

 

    “Valuation Dates” means each of the last three trading days of the exchange offer period (not including the expiration date), as it may be voluntarily extended, but not including the last two trading days that are part of any Mandatory Extension (as described in the section of this document entitled “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment—Mandatory Extension”); and

 

    “VWAP” means volume-weighted average price.

 

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QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

The following are some of the questions that shareholders may have, and answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this document, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document. You are urged to read this document in its entirety prior to making any decision.

Questions and Answers About this Exchange Offer

 

Q: Who may participate in this Exchange Offer?

 

A: Any U.S. holders of shares of TDCC common stock during the exchange offer period may participate in this exchange offer. Holders of TDCC’s Cumulative Convertible Perpetual Preferred Stock, Series A, may participate in this exchange offer only to the extent that they convert their preferred shares into shares of TDCC common stock and validly tender those shares of TDCC common stock prior to the expiration of this exchange offer. Although TDCC has mailed this document to its shareholders to the extent required by U.S. law, including shareholders located outside the United States, this document is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy, sell or exchange any shares of TDCC common stock, shares of Olin common stock or shares of Splitco common stock in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of TDCC, Olin or Splitco has taken any action under non-U.S. regulations to facilitate a public offer to exchange shares of TDCC common stock, shares of Olin common stock or shares of Splitco common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of TDCC common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for TDCC, Olin or Splitco to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of TDCC common stock, Splitco common stock or Olin common stock that may apply in their home countries. None of TDCC, Olin or Splitco can provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

TDCC believes a substantial majority of its shareholders are U.S. investors and does not expect the legal limitations described under this heading to cause the exchange offer to be underscribed.

 

Q: How many shares of Splitco common stock will I receive for each share of TDCC common stock that I tender?

 

A:

This exchange offer is designed to permit you to exchange your shares of TDCC common stock for shares of Splitco common stock at a 10 percent discount, calculated as set forth in this document, to the per-share equivalent value of Splitco common stock. Stated another way, for each $1.00 of your TDCC common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The value of the TDCC common stock will be based on the calculated per-share value for the TDCC common stock on the NYSE and the value of the Splitco common stock will be based on the calculated per-share

 

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  value for Olin common stock on the NYSE multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock), in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates. Please note, however, that the number of shares you can receive is subject to an upper limit of an aggregate of 2.9318 shares of Splitco common stock for each share of TDCC common stock accepted in this exchange offer. The next question and answer below describes how this limit may impact the value you receive. This exchange offer does not provide for a lower limit or minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” Because this exchange offer is subject to proration in the event of oversubscription, TDCC may accept for exchange only a portion of the shares of TDCC common stock tendered by you.

 

Q: Is there a limit on the number of shares of Splitco common stock I can receive for each share of TDCC common stock that I tender?

 

A: The number of shares you can receive is subject to an upper limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock accepted in this exchange offer. If the upper limit is in effect, you will ultimately receive less than $1.11 of Splitco common stock for each $1.00 of TDCC common stock that you tender, and you could receive much less. For example, if the calculated per-share value of TDCC common stock was $53.59 (the highest closing price for TDCC common stock on the NYSE during the three-month period prior to commencement of this exchange offer) and the calculated per-share value of Splitco common stock was $16.42 (based on the lowest closing price for Olin common stock on the NYSE during that three-month period multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock)), the value of Splitco common stock received for each $1.00 of TDCC common stock accepted for exchange would be approximately $0.90.

The upper limit represents a 15 percent discount for shares of Splitco common stock relative to shares of TDCC common stock based on the average daily VWAPs of TDCC common stock on the NYSE and Olin common stock on the NYSE on August 28, 2015, August 31, 2015, and September 1, 2015 (the last three trading days before the commencement of this exchange offer). The averages of the daily VWAPs of TDCC common stock and Olin common stock on August 28, 2015, August 31, 2015 and September 1, 2015, were $43.1746 and $19.8043, respectively. The upper limit was determined by dividing 100% of the calculated per-share value of TDCC common stock for such dates by 85% of the calculated per-share value of Splitco common stock for such dates (in each case determined in the manner described under “This Exchange Offer—Terms of this Exchange Offer—General”). TDCC set this upper limit to ensure that an unusual or unexpected drop in the trading price of Olin common stock, relative to the trading price of TDCC common stock, would not result in an unduly high number of shares of Splitco common stock being exchanged for each share of TDCC common stock accepted in this exchange offer, preventing a situation that might significantly reduce the benefits of this exchange offer to TDCC and its continuing shareholders due to a smaller number of outstanding shares being acquired by TDCC in this exchange offer.

 

Q: What will happen if the upper limit is in effect?

 

A: TDCC will announce whether the upper limit on the number of shares that can be received for each share of TDCC common stock tendered will be in effect at the expiration of the exchange offer period, through www.edocumentview.com/dowexchange and by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their shares of TDCC common stock during those days. The daily VWAP and trading prices of TDCC common stock and Olin common stock during this Mandatory Extension will not, however, affect the upper limit, which will be fixed at 2.9318 shares of Splitco common stock per share of TDCC common stock. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment—Mandatory Extension.”

 

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Q: How are the calculated per-share values of TDCC common stock and Splitco common stock determined for purposes of calculating the number of shares of Splitco common stock to be received in this exchange offer?

 

A: The calculated per-share value of a share of TDCC common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of TDCC common stock on the NYSE on each of the Valuation Dates. The calculated per-share value of a share of Splitco common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Olin common stock on the NYSE on each of the Valuation Dates multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock). TDCC will determine such calculations of the per-share values of TDCC common stock and Splitco common stock and such determination will be final.

 

Q: What is the “daily volume-weighted average price” or “daily VWAP?”

 

A: The “daily volume-weighted average price” for TDCC common stock and Olin common stock will be the volume-weighted average price of TDCC and Olin common stock on the NYSE during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE), except that such data will only take into account adjustments made to reported trades included by 4:10 p.m., New York City time. The daily VWAP will be as reported by Bloomberg Finance L.P. and displayed under the heading Bloomberg VWAP on the Bloomberg pages “DOW UN<Equity>VAP” with respect to TDCC common stock and “OLN UN<Equity>VAP” with respect to Olin common stock (or their equivalent successor pages if such pages are not available). The daily VWAPs provided by Bloomberg Finance L.P. may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices.

 

Q: Where can I find the daily VWAP of TDCC common stock and Olin common stock during the exchange offer period?

 

A: TDCC will maintain a website at www.edocumentview.com/dowexchange that provides the daily VWAP of both TDCC common stock and Olin common stock, indicative calculated per-share values for shares of TDCC common stock and shares of Splitco common stock, together with indicative exchange ratios, for each day during this exchange offer. During the period of the Valuation Dates, when the values of TDCC common stock and Olin common stock are calculated for the purposes of this exchange offer, the website will show the indicative exchange ratios based on indicative calculated per-share values calculated by TDCC, which will equal (i) on the first Valuation Date, the intra-day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and the actual daily VWAP on the second Valuation Date. During this period, the indicative exchange ratios and calculated per-share values will be updated at 10:30 a.m., 1:30 p.m. and no later than 4:30 p.m., New York City time.

 

Q: Why is the calculated per-share value for Splitco common stock based on the trading prices for Olin common stock?

 

A:

There is currently no trading market for Splitco common stock and no such trading market will be established in the future. TDCC believes, however, that the trading prices for Olin common stock, adjusted for the exchange ratio in the Merger, are an appropriate proxy for the trading prices of Splitco common stock because (a) prior to the Distribution, Splitco will issue to TDCC a number of shares of Splitco common stock such that the total number of shares of Splitco common stock outstanding immediately prior

 

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  to the Merger will be 100,000,000; (b) in the Merger, each share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock for each such share of Splitco common stock; and (c) at the Valuation Dates, it is expected that all the major conditions to the consummation of the Merger will have been satisfied and the Merger will be expected to be consummated shortly, such that investors should be expected to be valuing Olin common stock based on the expected value of such Olin common stock after the Merger. There can be no assurance, however, that Olin common stock after the Merger will trade on the same basis as Olin common stock trades prior to the Merger. See “Risk Factors—Risks Related to the Transactions—The trading prices of Olin common stock may not be an appropriate proxy for the prices of Splitco common stock.”

 

Q: How and when will I know the final exchange ratio?

 

A: Subject to the possible Mandatory Extension of this exchange offer described below, the final exchange ratio showing the number of shares of Splitco common stock that you will receive for each share of TDCC common stock accepted in this exchange offer will be available at www.edocumentview.com/dowexchange and separately announced by press release no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. In addition, as described below, you may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll-free number provided on the back cover of this document.

TDCC will announce whether the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at www.edocumentview.com/dowexchange and separately by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date will be made to permit shareholders to tender or withdraw their shares of TDCC common stock during those days.

 

Q: Will indicative exchange ratios be provided during the tender offer period?

 

A: Yes. Indicative exchange ratios will be available by contacting the information agent at the toll-free number provided on the back cover of this document on each day during the exchange offer period, calculated as though that day were the expiration date of this exchange offer. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect. You may also contact the information agent at its toll-free number to obtain these indicative exchange ratios.

In addition, for purposes of illustration, a table that indicates the number of shares of Splitco common stock that you would receive per share of TDCC common stock, calculated on the basis described above and taking into account the upper limit, assuming a range of averages of the daily VWAP of TDCC common stock and Olin common stock on the Valuation Dates is provided under “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: What if shares of TDCC common stock or shares of Olin common stock do not trade on any of the Valuation Dates?

 

A: If a market disruption event occurs with respect to TDCC common stock or Olin common stock on any of the Valuation Dates, the calculated per-share value of TDCC common stock and Splitco common stock will be determined using the daily VWAP of shares of TDCC common stock and shares of Olin common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to both TDCC common stock and Olin common stock. If, however, a market disruption event occurs as specified above, TDCC may terminate this exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of this exchange offer. For specific information as to what would constitute a market disruption event, see “This Exchange Offer—Conditions for the Consummation of this Exchange Offer.”

 

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Q: Are there circumstances under which I would receive fewer shares of Splitco common stock than I would have received if the exchange ratio were determined using the closing prices of TDCC common stock and Olin common stock on the final Valuation Date for this exchange offer?

 

A: Yes. For example, if the trading price of TDCC common stock were to increase during the period of the Valuation Dates, the calculated per-share value of TDCC common stock would likely be lower than the closing price of TDCC common stock on the final Valuation Date for this exchange offer. As a result, you may receive fewer shares of Splitco common stock for each $1.00 of TDCC common stock than you would have if that per-share value were calculated on the basis of the closing price of TDCC common stock on such date. Similarly, if the trading price of Olin common stock were to decrease during the period of the Valuation Dates, the calculated per-share value of Splitco common stock would likely be higher than the closing price of Olin common stock on the final Valuation Date for this exchange offer. This could also result in your receiving fewer shares of Splitco common stock for each $1.00 of TDCC common stock than you would otherwise receive if that per-share value were calculated on the basis of the closing price of Olin common stock on such date. See “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: Will TDCC distribute fractional shares?

 

A: Upon the consummation of this exchange offer, the exchange agent will hold the shares of Splitco common stock in trust for the holders of TDCC common stock who validly tendered their shares and, in case of a pro rata distribution, for the holders of record of TDCC common stock for the pro rata distribution. Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, with Splitco surviving the Merger and becoming a wholly-owned subsidiary of Olin. Each issued and outstanding share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock. In the Merger, no fractional shares of Olin common stock will be delivered to holders of Splitco common stock. All fractional shares of Olin common stock that a holder of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by a transfer agent appointed by Olin. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger, in the open market or otherwise, in each case at then-prevailing market prices as soon as practicable after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger.

 

Q: What is the aggregate number of shares of Splitco common stock being offered in this exchange offer?

 

A: In this exchange offer, TDCC is offering 100,000,000 shares of Splitco common stock, which will constitute all of the shares of Splitco common stock that will be issued and outstanding on the date of the consummation of this exchange offer.

 

Q: What happens if insufficient shares of TDCC common stock are tendered to allow TDCC to exchange all of the shares of Splitco common stock it holds?

 

A: If this exchange offer is consummated but fewer than all of the issued and outstanding shares of Splitco common stock owned by TDCC are exchanged because this exchange offer is not fully subscribed, the remaining shares of Splitco common stock owned by TDCC will be distributed on a pro rata basis to the holders of shares of TDCC common stock whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to those tendered shares of TDCC common stock to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed.

 

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Upon the consummation of this exchange offer, TDCC will deliver to the exchange agent a global certificate representing all of the Splitco common stock being distributed in this exchange offer, with irrevocable instructions to hold the shares of Splitco common stock in trust for holders of shares of TDCC common stock validly tendered and not withdrawn in this exchange offer and, in the case of a pro rata distribution, holders of shares of TDCC common stock whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in this exchange offer and to be distributed on a pro rata basis, and that number of shares of Splitco common stock will be held in trust for the holders of shares of TDCC common stock whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. See “This Exchange Offer—Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer.”

 

Q: What happens if TDCC declares a quarterly dividend during this exchange offer?

 

A: Historically, TDCC has declared quarterly dividends to be paid to shareholders of record as of the last trading day of a calendar quarter. All shareholders that own TDCC common stock as of the record date for the dividend are eligible to receive the dividend.

 

Q: Will tendering my shares affect my ability to receive the TDCC quarterly dividend?

 

A: No. If a dividend is declared by TDCC with a record date before the completion of this exchange offer, you will be entitled to that dividend even if you tendered your shares of TDCC common stock. Tendering your shares of TDCC common stock in this exchange offer is not a sale or transfer of those shares until they are accepted for exchange upon completion of this exchange offer.

 

Q: Will all shares of TDCC common stock that I tender be accepted in this exchange offer?

 

A: Not necessarily. Depending on the number of shares of TDCC common stock validly tendered in this exchange offer and not properly withdrawn, and the calculated per-share values of TDCC common stock and Splitco common stock determined as described above, TDCC may have to limit the number of shares of TDCC common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “This Exchange Offer—Terms of this Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock.”

An exception to proration can apply to shareholders who beneficially own “odd-lots,” that is, fewer than 100 shares of TDCC common stock. Such beneficial holders of TDCC common stock who validly tender all of their shares, and request preferential treatment as described in “Summary—Terms of this Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock,” will not to be subject to proration. The foregoing “odd-lots” preference does not apply to shares attributable to units of the TDCC Stock Fund held in participant accounts under the Dow Savings Plan. Thus, participants in the Dow Savings Plan who tender shares attributable to units of the TDCC Stock Fund held in their accounts under the plan will be subject to proration even if they hold units under the plan representing fewer than 100 shares. If an individual holds units of the TDCC Stock Fund under the Dow Savings Plan, and also holds shares outside the plan, if the number of shares held outside the plan is fewer than 100, the shares outside the plan will be eligible for the “odd-lots” preference without regard to the number of shares attributable to units of the TDCC Stock Fund the individual holds under the plan.

In all other cases, proration for each tendering shareholder will be based on (i) the proportion that the total number of shares of TDCC common stock to be accepted bears to the total number of shares of TDCC common stock validly tendered and not properly withdrawn and (ii) the number of shares of TDCC common stock validly tendered and not properly withdrawn by that shareholder (and not on that shareholder’s

 

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aggregate ownership of shares of TDCC common stock). Any shares of TDCC common stock not accepted for exchange as a result of proration will be returned to tendering shareholders promptly after the final proration factor is determined.

 

Q: Will I be able to sell my shares of Splitco common stock after this exchange offer is completed?

 

A: No. There currently is no trading market for shares of Splitco common stock and no such trading market will be established in the future. The exchange agent will hold all issued and outstanding shares of Splitco common stock in trust until the shares of Splitco common stock are converted into the right to receive shares of Olin common stock in the Merger. See “This Exchange Offer—Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer.”

 

Q: How many shares of TDCC common stock will TDCC accept if this exchange offer is completed?

 

A: The number of shares of TDCC common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio and the number of shares of TDCC common stock tendered. The largest possible number of shares of TDCC common stock that will be accepted would equal 100,000,000 divided by the final exchange ratio. For example, assuming that the final exchange ratio is 2.7689 (the current indicative exchange ratio based on the daily VWAPs of TDCC common stock and Olin common stock on August 28, 2015, August 31, 2015, and September 1, 2015), then TDCC would accept up to a total of approximately 36,115,425 shares of TDCC common stock.

 

Q: Are there any conditions to TDCC’s obligation to complete this exchange offer?

 

A: Yes. This exchange offer is subject to various conditions listed under “This Exchange Offer—Conditions for the Consummation of this Exchange Offer.” If any of these conditions are not satisfied or waived prior to the expiration of this exchange offer, TDCC will not be required to accept shares for exchange and may extend or terminate this exchange offer.

TDCC may waive any of the conditions to this exchange offer. For a description of the material conditions precedent to this exchange offer, including satisfaction or waiver of the conditions to the consummation of the Transactions and other conditions, see “This Exchange Offer—Conditions for the Consummation of this Exchange Offer.” Olin has no right to waive any of the conditions to this exchange offer.

 

Q: When does this exchange offer expire?

 

A: The period during which you are permitted to tender your shares of TDCC common stock in this exchange offer will expire at 8:00 a.m., New York City time, on October 1, 2015, unless TDCC extends this exchange offer. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment.”

 

Q: Can this exchange offer be extended and under what circumstances?

 

A: Yes. TDCC can extend this exchange offer, in its sole discretion, at any time and from time to time. For instance, this exchange offer may be extended if any of the conditions for the consummation of this exchange offer listed under “This Exchange Offer—Conditions for the Consummation of this Exchange Offer” are not satisfied or waived prior to the expiration of this exchange offer. In case of an extension of this exchange offer, TDCC will publicly announce the extension at www.edocumentview.com/dowexchange and separately by press release no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled expiration date. In addition, if the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the second trading day following the last trading day prior to the originally contemplated expiration date.

 

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Q: How do I participate in this exchange offer?

 

A: The procedures you must follow to participate in this exchange offer will depend on whether you hold your shares of TDCC common stock in certificated form, through a broker, dealer, commercial bank, trust company or similar institution or, or through the Trust under the Dow Savings Plan, or if your shares of TDCC common stock are held in book-entry via the Direct Registration System (“DRS”) or in uncertificated form as CIP Shares. For specific instructions about how to participate, see “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering.”

 

Q: What if I participate in The Dow Chemical Company Employees’ Savings Plan?

 

A: If your account holds units of the TDCC Stock Fund under the Dow Savings Plan, you may elect either to keep or to exchange all or some of the shares attributable to the units for shares of Splitco common stock. You will receive instructions from the Trustee via letter or email (as permitted by the Dow Savings Plan) informing you how to make an election. If you do not make a timely election in accordance with the Trustee’s instructions by the deadline set forth in the Trustee’s instructions, none of the shares attributable to the units held in your account will be exchanged for shares of Splitco common stock and your holdings of units of the TDCC Stock Fund in your Dow Savings Plan account will remain unchanged. If you do timely elect to exchange shares attributable to the units for Splitco common stock, in the Merger, each such share of Splitco common stock will be converted into the right to receive units of a unitized stock fund holding Olin common stock (as described further below) based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” For a more detailed description of how to tender your shares of TDCC common stock if you participate in the Dow Savings Plan, please refer to the specific instructions regarding how to tender your shares, if any, under the Dow Savings Plan, which will be included in the written information to be provided to you by the Trustee.

The TDCC Stock Fund under the Dow Savings Plan is a unitized stock fund holding TDCC common stock and cash and short-term investments maintained for liquidity purposes. Participants in the Dow Savings Plan whose accounts are invested in the TDCC Stock Fund have units in such fund allocated to their respective accounts, which units represent their respective pro rata interests in such fund. For purposes of this exchange offer, references to shares of TDCC common stock being held in participant accounts under the Dow Savings Plan, elections to keep or tender such shares, and exchanges of such shares mean, with respect to a participant, the shares of TDCC common stock represented by the units in the TDCC Stock Fund allocated to the participant’s account under the plan.

In connection with the exchange, any shares of Olin common stock held under the Dow Savings Plan will be held in a unitized stock fund. In addition to holding Olin common stock, such Olin common stock fund may also hold cash and short-term investments for liquidity purposes. Accounts of plan participants who elect to participate in the exchange offer will receive units in the Olin common stock fund. For purposes of this document and the exchange offer, references to shares of Olin common stock being held in participant accounts under the Dow Savings Plan and liquidation of shares of Olin common stock mean, with respect to a participant, the shares of Olin common stock represented by the units in the Olin common stock fund allocated to the participant’s account under the plan.

Notwithstanding anything in this document to the contrary, with respect to shares of TDCC common stock held under the Dow Savings Plan, the terms of such plan and Trust and applicable law govern all transactions involving such shares of TDCC common stock. It is possible that the investment fiduciaries of the Dow Savings Plan, to fulfill their fiduciary obligations, will impose additional conditions and limitations on the participation of the plan and its participants in the exchange offer, or will take the position that Olin stock will not be a permissible investment under the Dow Savings Plan. If that is the case, participants in the Dow Savings Plan will be so notified. In addition, the Trustee may be prohibited under ERISA from following directions related to tendering shares attributable to units held in the Dow Savings Plan. Please refer to the materials provided by the Trustee for more details.

 

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Q: How do I tender my shares of TDCC common stock after the final exchange ratio has been determined?

 

A: If you wish to tender your shares after the final exchange ratio has been determined, you will generally need to do so by means of delivering a notice of guaranteed delivery and complying with the guaranteed delivery procedures described in the section entitled “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures.” If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf.

If your shares of TDCC common stock are held through an institution and you wish to tender your TDCC common stock after The Depository Trust Company has closed, the institution must deliver a notice of guaranteed delivery to the exchange agent via facsimile prior to 8:00 a.m., New York City time, on the expiration date.

If you hold units of the TDCC Stock Fund in a Dow Savings Plan account and you wish to tender your TDCC common stock after the final exchange ratio has been determined, the Trustee must deliver a notice of guaranteed delivery to the exchange agent via facsimile prior to 8:00 a.m., New York City time, on the expiration date.

If you hold units of the TDCC Stock Fund in a Dow Savings Plan account, you must tender your shares attributable to the units by the deadline set forth in the Trustee’s instructions, and it is possible that the final exchange ratio will not have been determined at the time of such deadline.

 

Q: Can I tender only a portion of my shares of TDCC common stock in this exchange offer?

 

A: Yes. You may tender all, some or none of your shares of TDCC common stock.

 

Q: What do I do if I want to retain all of my shares of TDCC common stock?

 

A: If you want to retain all of your shares of TDCC common stock, you do not need to take any action. However, after the Transactions, DCP will no longer be owned by TDCC, and as a holder of TDCC common stock you will no longer hold shares in a company that owns DCP (unless the exchange offer is consummated but is not fully subscribed and the remaining shares of Splitco common stock are distributed on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after consummation of the exchange offer).

 

Q: Can I change my mind after I tender my shares of TDCC common stock?

 

A: Yes. You may withdraw your tendered shares at any time before this exchange offer expires. See “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Withdrawal Rights.” If you change your mind again, you can re-tender your shares of TDCC common stock by following the tender procedures again prior to the expiration of this exchange offer.

 

Q: Will I be able to withdraw the shares of TDCC common stock I tender after the final exchange ratio has been determined?

 

A: Yes. The final exchange ratio used to determine the number of shares of Splitco common stock that you will receive for each share of TDCC common stock accepted in this exchange offer will be announced no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date of this exchange offer, which is September 30, 2015, unless this exchange offer is extended or terminated. You have the right to withdraw shares of TDCC common stock you have tendered at any time before 8:00 a.m., New York City time, on the expiration date, which is October 1, 2015. See “This Exchange Offer—Terms of this Exchange Offer.”

 

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If the upper limit on the number of shares of Splitco common stock that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date, which will permit you to tender or withdraw your shares of TDCC common stock during those days, either directly or by acting through a broker, dealer, commercial bank, trust company or similar institution on your behalf.

 

Q: How do I withdraw my tendered TDCC common stock after the final exchange ratio has been determined?

 

A: If you are a registered shareholder of TDCC common stock (which includes persons holding certificated shares and book-entry shares held through DRS or CIP Shares) and you wish to withdraw your shares after the final exchange ratio has been determined, then you must deliver a written notice of withdrawal or a facsimile transmission notice of withdrawal to the exchange agent prior to 8:00 a.m., New York City time, on the expiration date. The information that must be included in that notice is specified under “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Withdrawal Rights.”

If you hold your shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, you should consult that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile notice of withdrawal to the exchange agent on your behalf before 8:00 a.m., New York City time, on the expiration date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered shareholder, you will not be able to provide a notice of withdrawal for such shares directly to the exchange agent.

If you hold units of the TDCC Stock Fund in a Dow Savings Plan account and you wish to withdraw shares attributable to the units that you have tendered, you must withdraw such shares by the deadline set forth in the Trustee’s instructions, and it is possible that such deadline may occur before the final exchange ratio has been determined. You should refer to the procedures and deadlines set forth in the Trustee’s informational materials provided to you. If you hold units of the TDCC Stock Fund in a Dow Savings Plan account, the Trustee must deliver the notice of withdrawal with respect to any shares you wish to withdraw, and you will not be able to provide a notice of withdrawal for such shares directly to the exchange agent.

If your shares of TDCC common stock are held through an institution and you wish to withdraw shares of TDCC common stock after The Depository Trust Company has closed, the institution must deliver a written notice of withdrawal to the exchange agent prior to 8:00 a.m., New York City time, on the expiration date, in the form of The Depository Trust Company’s notice of withdrawal and you must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. Shares can be properly withdrawn only if the exchange agent receives a withdrawal notice directly from the relevant institution that tendered the shares through the Depository Trust Company. See “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Withdrawing Your Shares After the Final Exchange Ratio Has Been Determined.”

 

Q: Will I be subject to U.S. federal income tax on the shares of Splitco common stock that I receive in this exchange offer or on the shares of Olin common stock that I receive in the Merger?

 

A: Shareholders of TDCC generally will not recognize any gain or loss for U.S. federal income tax purposes as a result of this exchange offer or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of fractional shares of Olin common stock received in the Merger.

The material U.S. federal income tax consequences of the exchange offer and the Merger are described in more detail under “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

 

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Q: Are there any material differences between the rights of holders of TDCC common stock and Olin common stock?

 

A: Yes. TDCC is a Delaware corporation and Olin is a Virginia corporation, and each is subject to different laws and organizational documents. Holders of TDCC common stock, whose rights are currently governed by TDCC’s organizational documents and Delaware law, will, with respect to shares validly tendered and exchanged immediately following this exchange offer, become shareholders of Olin and their rights will be governed by Olin’s organizational documents and Virginia law. The material differences between the rights associated with shares of TDCC common stock and shares of Olin common stock that may affect TDCC shareholders whose shares are accepted for exchange in this exchange offer and who will obtain shares of Olin common stock in the Merger relate to, among other things, classification of the board of directors, removal of directors, special meetings, taking of shareholder action by written consent, advance notice procedures for shareholder proposals or director nominations, procedures and thresholds for amending organizational documents, ownership limitations and procedures and thresholds for approval of certain business combinations. For a further discussion of the material differences between the rights of holders of TDCC common stock and holders of Olin common stock, see “Comparison of Rights of Holders of TDCC Common Stock and Olin Common Stock.”

 

Q: Are there any appraisal rights for holders of shares of TDCC common stock?

 

A: No. There are no appraisal rights available to holders of shares of TDCC common stock in connection with this exchange offer.

 

Q: What will TDCC do with the shares of TDCC common stock that are tendered, and what is the impact of the exchange offer on TDCC’s share count?

 

A: The shares of TDCC common stock that are tendered and accepted for exchange in the exchange offer will be held as treasury stock by TDCC. Any shares of TDCC common stock acquired by TDCC in the exchange offer will reduce the total number of shares of TDCC common stock outstanding, although TDCC’s actual number of shares outstanding on a given date reflects a variety of factors such as option exercises.

 

Q: Whom do I contact for information regarding this exchange offer?

 

A: You may call the information agent, Georgeson Inc., at (888) 566-8006, to ask any questions about this exchange offer or to request additional documents, including copies of this document and the letter of transmittal (including the instructions thereto).

Questions and Answers About the Transactions

 

Q: What are the key steps of the Transactions?

 

A: Below is a summary of the key steps of the Transactions. A step-by-step description of material events relating to the Transactions is set forth under “The Transactions.”

 

    TDCC will transfer DCP, directly or indirectly, to Splitco or the DCP Subsidiaries. This transfer will include, among other assets and liabilities of DCP, TDCC’s equity interests in the JV Entity, which, because the JV Partner has exercised its right to transfer its equity interests in the JV Entity to TDCC or TDCC’s designee in connection with the Transactions pursuant to the organizational documents of the JV Entity, will constitute 100 percent of the equity interests in the JV Entity.

 

    Immediately prior to the Distribution, and on the closing date of the Merger, TDCC will effect the Contribution, pursuant to which all of the DCP Subsidiaries will become direct or indirect subsidiaries of Splitco.

 

   

On or about the closing date of the Merger, Olin and Splitco will incur new indebtedness in an aggregate principal amount of approximately $2,237 million. Splitco will use a portion of the proceeds thereof to pay to TDCC the Special Payment in an amount equal to the Below Basis Amount

 

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immediately prior to the Distribution, and the remainder of the proceeds will be used to refinance certain existing debt of Olin and the JV Entity and to pay fees and expenses of Olin and make other payments in connection with the Transactions. In addition, immediately prior to the Distribution, Splitco expects to issue to TDCC the Splitco Securities or, at TDCC’s election, pay to TDCC as a dividend an amount in cash equal to the Above Basis Amount. TDCC expects to transfer the Splitco Securities, if issued, on or about the date of the Distribution to investment banks and/or commercial banks in exchange for existing TDCC debt in the Debt Exchange. The Splitco Securities are expected to be subsequently sold to third-party investors as described below. As a result, TDCC expects to receive approximately $2,030 million from the Special Payment and the Debt Exchange. If TDCC determines that the Debt Exchange is not reasonably likely to be consummated at the time of the Distribution and elects to receive cash from Splitco in lieu of the Splitco Securities as described under “The Merger Agreement—Debt Exchange,” Splitco will incur new indebtedness in the form of debt securities, term loans or a combination thereof to finance such cash payment.

 

    Immediately prior to the Distribution, Splitco will also issue to TDCC additional shares of Splitco common stock. Following this issuance, TDCC will own 100,000,000 shares of Splitco common stock, which will constitute all of the outstanding stock of Splitco.

 

    TDCC will offer to TDCC shareholders the right to exchange all or a portion of their shares of TDCC common stock for shares of Splitco common stock at a 10 percent discount, calculated as set forth in this document, to the equivalent per-share value of Olin common stock based on the 0.87482759 shares of Olin common stock corresponding to each share of Splitco common stock as specified in the Merger Agreement. If the exchange offer is consummated but is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of the exchange offer. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Olin common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to TDCC shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

 

    Immediately after the Distribution, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and as a wholly-owned subsidiary of Olin. In the Merger, each share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” Immediately after the consummation of the Merger, approximately 52.7 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger holders of Splitco common stock and approximately 47.3 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger Olin shareholders.

 

    TDCC and Olin expect the Splitco Securities to be transferred by TDCC on or about the closing date of the Merger to investment banks and/or commercial banks in the Debt Exchange in exchange for existing TDCC debt. The Splitco Securities will then be sold by the investment banks and/or commercial banks to third-party investors.

 

Q: What are the material U.S. federal income tax consequences to Olin and Olin’s shareholders resulting from the Transactions?

 

A:

Olin will not recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger. Because Olin shareholders will not participate in the Distribution or the Merger, Olin shareholders will

 

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  generally not recognize gain or loss upon either the Distribution (including this exchange offer) or the Merger. The material U.S. federal income tax consequences of the Distribution and the Merger are described in more detail in “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

 

Q: What will Olin shareholders receive in the Merger?

 

A: Olin shareholders will not directly receive any consideration in the Merger. All shares of Olin common stock issued and outstanding immediately before the Merger will remain issued and outstanding after the consummation of the Merger. Immediately after the Merger, Olin shareholders will continue to own shares in Olin, which will include DCP. Splitco, as a wholly-owned subsidiary of Olin, and Olin will be responsible for repaying the approximately $3,392 million of debt that will be incurred in connection with the Transactions. After the consummation of the Merger, these debt obligations incurred by Splitco are expected to be guaranteed by Olin, and the debt obligations incurred by Olin in connection with the Transactions are expected to be guaranteed by Splitco.

 

Q: What is the estimated total value of the consideration to be paid by Olin in the Transactions?

 

A: Olin expects to issue approximately 87.5 million shares of Olin common stock in the Merger. Based upon the reported closing sale price of $22.50 per share for Olin common stock on the NYSE on August 5, 2015, the total value of the shares to be issued by Olin and the cash and debt instruments expected to be received by TDCC in the Transactions, including up-front payments under the Ethylene Agreements, would have been approximately $4,495 million. The actual value of the Olin common stock to be issued in the Merger will depend on the market price of shares of Olin common stock at the time of determination.

 

Q: Are there possible adverse effects on the value of Olin common stock ultimately to be received by TDCC shareholders who participate in the exchange offer?

 

A: This exchange offer is designed to permit TDCC shareholders to exchange their shares of TDCC common stock for a number of shares of Splitco common stock that corresponds to a 10 percent discount, calculated as set forth in this document, to the equivalent amount of Olin common stock based on the 0.87482759 shares of Olin common stock corresponding to each share of Splitco common stock as specified in the Merger Agreement. The existence of a discount, along with the issuance of shares of Olin common stock pursuant to the Merger, may negatively affect the market price of Olin common stock. Further, Splitco will be the obligor on the New Term Facilities, the Splitco Securities, the Other Splitco Debt Securities and the Bridge Facility (each as described in more detail in “Debt Financing”), if any, after the consummation of the Transactions, which New Term Facilities, Splitco Securities, Other Splitco Debt Securities and Bridge Facility, if any, are expected to be guaranteed by Olin after the consummation of the Merger, subject to certain exceptions. This additional indebtedness could materially and adversely affect the liquidity, results of operations and financial condition of Olin. Olin also expects to incur significant one-time costs in connection with the Transactions, which may have an adverse impact on Olin’s liquidity, cash flows and operating results in the periods in which they are incurred. Finally, Olin’s management will be required to devote a significant amount of time and attention to the process of integrating the operations of Olin’s business and DCP. If Olin management is not able to manage the integration process effectively, or if any significant business activities are interrupted as a result of the integration process, Olin’s business could suffer and its stock price may decline. See “Risk Factors” for a further discussion of the material risks associated with the Transactions.

 

Q: How will the Transactions impact the future liquidity and capital resources of Olin?

 

A:

The approximately $3,392 million of indebtedness expected to be incurred under the New Term Facilities, the Sumitomo Term Facility, the Splitco Securities, the Other Splitco Debt Securities and the Bridge Facility, if any, will be the debt obligations of Splitco and Olin. After the consummation of the Merger, the debt obligations of Splitco are expected to be guaranteed by Olin, and the debt obligations of Olin incurred

 

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  to finance the Transactions are expected to be guaranteed by Splitco. Olin anticipates that its primary sources of liquidity for working capital and operating activities, including any future acquisitions, will be cash from operations and borrowings under existing debt arrangements and the New Credit Facilities and the Sumitomo Term Facility described in more detail in “Debt Financing.” Olin expects that these sources of liquidity will be sufficient to make required payments of interest on the outstanding Olin debt and to fund working capital and capital expenditure requirements, including the significant one-time costs relating to the Transactions described above. Olin expects that it will be able to comply with the financial and other covenants of its existing debt arrangements, including the credit agreement governing the Existing Credit Facilities, and the covenants under the agreements governing the New Credit Facilities and the Sumitomo Term Facility, the indentures or other instruments governing the Splitco Securities and the Other Splitco Debt Securities and the credit agreement governing the Bridge Facility, if any. Olin believes that the combination of DCP with Olin’s existing business will result in estimated annualized cost synergies of approximately $200 million within three years from the consummation of the Transactions as a result of (1) approximately $50 million in expected savings from procurement and logistics, (2) approximately $70 million in expected savings from improved operating efficiencies and (3) approximately $80 million in expected savings from asset optimization. If Olin is able to increase sales to new third-party customers and access new product markets as a result of the Transactions, Olin estimates that additional annualized synergies of up to $100 million may potentially be achievable within three years from the consummation of the Transactions. Olin expects to incur significant, one-time costs in connection with the Transactions, including approximately (1) $55 to $60 million during 2015 of advisory, legal, accounting, integration and other professional fees related to the Transactions, (2) $25 to $30 million of financing-related fees, (3) $50 million of costs associated with the change in control mandatory acceleration of expenses under deferred compensation plans as a result of the Transactions, (4) $100 to $150 million in transition-related costs during the first three years following the consummation of the Transactions, and (5) $200 million in incremental capital spending during the first three years following the consummation of the Transactions that Olin management believes are necessary to realize the anticipated synergies from the Transactions. See “Information on Olin—Olin’s Liquidity and Capital Resources After the Consummation of the Transactions.” The incurrence of these costs may have an adverse impact on Olin’s liquidity, cash flows and operating results in the periods in which they are incurred.

 

Q: How do the Transactions impact Olin’s dividend policy?

 

A: Since the second quarter of 1999, Olin has paid quarterly dividends of $0.20 per share. The payment of cash dividends is subject to the discretion of the Olin Board and will be determined in light of then-current conditions, including Olin’s earnings, Olin’s operations, Olin’s financial condition, Olin’s capital requirements and other factors deemed relevant by the Olin Board. Pursuant to the Merger Agreement, Olin has agreed that prior to the consummation of the Merger, Olin will not declare or pay any dividends or other distributions, except for the declaration and payment of regular quarterly cash dividends of no more than $0.20 per share. In the future, the Olin Board may change its dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.

 

Q: What will TDCC receive in the Transactions?

 

A:

Immediately prior to the Distribution, TDCC will receive the Special Payment as a dividend and the Splitco Securities to be used in the Debt Exchange (or cash if TDCC elects to receive a cash dividend from Splitco in lieu of the Splitco Securities). The Splitco Securities are expected to be issued by Splitco directly to TDCC prior to the Distribution. The Splitco Securities will be the debt obligations of Splitco and, following the consummation of the Merger, are expected to be guaranteed by Olin. As a result, TDCC expects to receive approximately $2,030 million from the Special Payment and the Debt Exchange in connection with the Separation, the Contribution and the Distribution, subject to adjustments. In addition, Olin will make a cash payment to TDCC based on TDCC’s U.S. pension liability election, as further described under “Other Agreements—Employee Matters Agreement—U.S. Tax-Qualified Defined Benefit Pension Plans,” and will

 

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  make up-front cash payments to TDCC under the Ethylene Agreements as further described under “Other Agreements—Other Ancillary Agreements—Supply Agreements for Raw Materials.”

 

Q. What will you receive in the Transactions?

 

A. In the exchange offer, TDCC will offer to TDCC shareholders the right to exchange all or a portion of their shares of TDCC common stock for shares of Splitco common stock at a 10 percent discount, calculated as set forth in this document, to the per-share value of Olin common stock based on the 0.87482759 shares of Olin common stock corresponding to each share of Splitco common stock as specified in the Merger Agreement, subject to proration in the event of oversubscription. If the exchange offer is consummated but is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock owned by TDCC on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed. In all cases, the exchange agent will hold all issued and outstanding shares of Splitco common stock in trust until the shares of Splitco common stock are converted into the right to receive shares of Olin common stock in the Merger. You will not be able to trade shares of Splitco common stock during this period or at any time before or after the consummation of the Merger. In the Merger, each share of Splitco common stock will be converted into the right to receive Olin common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

 

Q: Are there any conditions to the consummation of the Transactions?

 

A: Yes. The consummation of the Transactions is subject to a number of conditions, including:

 

    the approval by Olin’s shareholders of the Share Issuance and the Charter Amendment;

 

    the termination or expiration of the waiting period under the HSR Act, and the receipt of any governmental approvals required under the antitrust laws in certain other jurisdictions;

 

    the approval for listing on the NYSE of the shares of Olin common stock to be issued in the Merger;

 

    the effectiveness under the Securities Act of Splitco’s registration statement on Form S-4 and Form S-1 (Reg. No. 333-204006) and Olin’s registration statement on Form S-4 (Reg. No. 333-203990), and the absence of any stop order issued by the SEC or any pending proceeding before the SEC seeking a stop order with respect thereto;

 

    the receipt of certain rulings from the Internal Revenue Service (the “IRS”);

 

    the receipt of the TDCC RMT Tax Opinion by TDCC and the receipt by Olin of an opinion from Olin’s tax counsel with respect to the Merger;

 

    the completion of the various transaction steps contemplated by the Merger Agreement and the Separation Agreement, including the Separation, the Contribution and the Distribution;

 

    the consummation of the Debt Exchange on or about the closing date of the Merger, unless TDCC elects to receive a cash dividend from Splitco in lieu of the Splitco Securities; and

 

    other customary conditions.

On June 16, 2015, Olin announced that the waiting period applicable to the Merger under the HSR Act expired and on July 6, 2015 Olin announced that all foreign regulatory approvals required to close the Merger had been obtained. On July 17, 2015, TDCC announced that it had received a favorable private letter ruling from the IRS with respect to certain aspects of the Separation and Distribution.

To the extent permitted by applicable law, TDCC and Splitco, on the one hand, and Olin and Merger Sub, on the other hand, may waive the satisfaction of the conditions to their respective obligations to consummate the Transactions. If Olin waives the satisfaction of a material condition to the consummation of the Transactions, Olin will evaluate the appropriate facts and circumstances at that time and re-solicit

 

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shareholder approval of the issuance of shares of Olin common stock in the Merger if required to do so by law or the rules of the NYSE. The Merger Agreement provides that TDCC or Olin may terminate the Merger Agreement if the Merger is not consummated on or before December 26, 2015 (or, if such date is extended as described under “The Merger Agreement—Termination,” March 26, 2016).

This document describes these conditions in more detail under “The Merger Agreement—Conditions to the Merger.”

 

Q: When will the Transactions be completed?

 

A: The Transactions are expected to be completed early in the fourth quarter of 2015. However, it is possible that the Transactions could be completed at a later time or not at all. For a discussion of the conditions, see “The Merger Agreement—Conditions to the Merger.”

 

Q: Are there risks associated with the Transactions?

 

A: Yes. The material risks and uncertainties associated with the Transactions are discussed in the section of this document entitled “Risk Factors” and the section of this document entitled “Cautionary Statement on Forward-Looking Statements.” Those risks include, among others, the possibility that the Transactions may not be completed, the possibility that Olin may fail to realize the anticipated benefits of the Merger, the uncertainty that Olin will be able to integrate DCP successfully, the possibility that Olin may be unable to provide benefits and services or access to equivalent financial strength and resources to DCP that historically have been provided by TDCC, the additional long-term indebtedness and liabilities that Olin and its subsidiaries will have following the consummation of the Transactions and the substantial dilution to the ownership interest of current Olin shareholders following the consummation of the Merger.

 

Q: What shareholder approvals are needed in connection with the Transactions?

 

A: Olin cannot complete the Transactions unless the proposal relating to the Share Issuance is approved by the affirmative vote of a majority of votes cast on the proposal at the special meeting and the proposal relating to the Charter Amendment is approved by the affirmative vote of a majority of the shares of Olin common stock entitled to vote on the proposal. Additionally, TDCC as the sole shareholder of Splitco, and subject to satisfaction of the conditions set out in the Merger Agreement and the Separation Agreement, will approve the Merger prior to the Distribution.

 

Q: Where will the Olin shares to be issued in the Merger be listed?

 

A: Olin common stock is listed on the NYSE under “OLN.” After the consummation of the Transactions, all shares of Olin common stock issued in the Merger, and all other outstanding shares of Olin common stock, will continue to be listed on the NYSE.

 

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SUMMARY

The following summary contains certain information described in more detail elsewhere in this document. It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should carefully review this entire document and the documents it refers to. See “Where You Can Find More Information; Incorporation by Reference.”

The Companies

Olin Corporation

Olin Corporation

190 Carondelet Plaza, Suite 1530

Clayton, Missouri 63105

Telephone: (314) 480-1400

Olin Corporation, incorporated in 1892, is a Virginia corporation having its principal executive offices in Clayton, MO. Olin Corporation is a manufacturer concentrated in three business segments: Chlor Alkali Products, Chemical Distribution and Winchester.

Blue Cube Acquisition Corp.

Blue Cube Acquisition Corp.

c/o Olin Corporation

190 Carondelet Plaza, Suite 1530

Clayton, Missouri 63105

Telephone: (314) 480-1400

Blue Cube Acquisition Corp., a Delaware corporation referred to in this document as Merger Sub, is a newly formed, direct wholly-owned subsidiary of Olin that was organized specifically for the purpose of completing the Merger. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

The Dow Chemical Company

The Dow Chemical Company

2030 Dow Center

Midland, Michigan 48674

Telephone: (989) 636-1000

The Dow Chemical Company, incorporated in 1947 under Delaware law, is the successor to a Michigan corporation of the same name, organized in 1897. TDCC’s principal executive offices are located at 2030 Dow Center, Midland, Michigan 48674. In 2014, TDCC had annual sales of more than $58 billion and employed approximately 53,000 people worldwide. TDCC’s more than 6,000 product families are manufactured at 201 sites in 35 countries across the globe.

Blue Cube Spinco Inc.

Blue Cube Spinco Inc.

c/o The Dow Chemical Company

2030 Dow Center

Midland, Michigan 48674

Telephone: (989) 636-1000

 



 

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Blue Cube Spinco Inc., a Delaware corporation referred to in this document as Splitco, is a newly formed, direct, wholly-owned subsidiary of TDCC that was organized specifically for the purpose of effecting the Separation. Splitco has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

Splitco is a holding company. In the Transactions, TDCC will transfer, directly or indirectly, certain assets and liabilities related to DCP to Splitco or the DCP Subsidiaries and will contribute the equity interests in the DCP Subsidiaries to Splitco. In exchange therefor, Splitco will incur new indebtedness and will pay to TDCC the Special Payment in an amount equal to the Below Basis Amount. Splitco will also issue to TDCC the Splitco Securities or, at TDCC’s election, pay to TDCC as a dividend an amount in cash equal to the Above Basis Amount. For the fiscal year ended December 31, 2014, DCP generated net sales of $4,776 million and a net loss of $7  million.

The Transactions

On March 27, 2015, Olin and TDCC announced that they, along with Splitco and Merger Sub, had entered into the Merger Agreement, and that TDCC and Splitco had entered into the Separation Agreement, which together provide for the combination of Olin’s business and DCP. In the Transactions, TDCC will transfer DCP to Splitco. Prior to the Distribution, Splitco will incur new indebtedness and will pay to TDCC the Special Payment. Splitco will also issue to TDCC the Splitco Securities or, at TDCC’s election, pay to TDCC as a dividend an amount in cash equal to the Above Basis Amount. If issued, the Splitco Securities are expected to be transferred by TDCC to investment banks and/or commercial banks on or about the closing date of the Merger in exchange for existing TDCC Debt in the Debt Exchange. As a result, TDCC expects to receive approximately $2,030 million from the Special Payment and the Debt Exchange.

On the closing date of the Merger, TDCC will distribute shares of Splitco common stock to its participating shareholders in an exchange offer. If the exchange offer is consummated but is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of the exchange offer. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive its rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Olin common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to TDCC shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter. Immediately after the Distribution and on the closing date of the Merger, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin. In the Merger, each share of Splitco common stock will be converted into the right to receive Olin common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

Olin expects to issue approximately 87.5 million shares of Olin common stock in the Merger. Based upon the reported closing sale price of $22.50 per share for Olin common stock on the NYSE on August 5, 2015, the total value of the shares to be issued by Olin and the cash and debt instruments expected to be received by TDCC in the Transactions, including up-front payments under the Ethylene Agreements, would have been approximately $4,495 million. The actual value of the Olin common stock to be issued in the Merger will depend on the market price of shares of Olin common stock at the time of determination.

 



 

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After the Merger, Olin will own and operate DCP through Splitco, which will be Olin’s wholly-owned subsidiary, and will also continue its current businesses. All shares of Olin common stock, including those issued in the Merger, will be listed on the NYSE under Olin’s current trading symbol “OLN.”

Below is a step-by-step description of the sequence of material events relating to the Transactions.

Step 1    Separation

On or prior to the date of the Distribution, TDCC will transfer DCP to Splitco or the DCP Subsidiaries. Splitco and the DCP Subsidiaries are newly formed, direct and indirect wholly-owned subsidiaries of TDCC. This transfer will include, among other assets and liabilities of DCP, TDCC’s equity interests in the JV Entity, which, because the JV Partner has exercised its right to transfer its equity interests in the JV Entity to TDCC or TDCC’s designee in connection with the Transactions pursuant to the organizational documents of the JV Entity, will constitute 100 percent of the equity interests in the JV Entity, as more fully described under “The Separation Agreement—Separation of the Dow Chlorine Products Business—Transfer of the JV Entity Interests.”

Step 2    Contribution

Immediately prior to the Distribution, and on the closing date of the Merger, TDCC will effect the Contribution, pursuant to which all of the DCP Subsidiaries will become direct or indirect subsidiaries of Splitco.

Step 3    Incurrence of Debt and Issuance of Splitco Common Stock to TDCC

On or about the closing date of the Merger, Olin and Splitco will incur new indebtedness in an aggregate principal amount of approximately $2,237 million. Splitco will use a portion of the proceeds thereof to pay to TDCC the Special Payment immediately prior to the Distribution, and the remainder of the proceeds will be used to refinance certain existing debt of Olin and the JV Entity and to pay fees and expenses of Olin and make other payments in connection with the Transactions. In addition, immediately prior to the Distribution, Splitco expects to issue to TDCC the Splitco Securities or, at TDCC’s election, pay to TDCC as a dividend an amount in cash equal to the Above Basis Amount. TDCC expects to transfer the Splitco Securities, if issued, on or about the date of the Distribution to investment banks and/or commercial banks in exchange for existing TDCC debt. The Splitco Securities are expected to be subsequently sold to third-party investors as described below. As a result, TDCC expects to receive approximately $2,030 million from the Special Payment and the Debt Exchange. If TDCC determines that the Debt Exchange is not reasonably likely to be consummated at the time of the Distribution and elects to receive cash from Splitco in lieu of the Splitco Securities as described under “The Merger Agreement—Debt Exchange,” Splitco will incur new indebtedness in the form of debt securities, term loans or a combination thereof to finance such cash payment.

Immediately prior to the Distribution, Splitco will also issue to TDCC additional shares of Splitco common stock. Following this issuance, TDCC will own 100,000,000 shares of Splitco common stock, which will constitute all of the outstanding stock of Splitco.

Step 4    Distribution—Exchange Offer

TDCC will offer to TDCC shareholders the right to exchange all or a portion of their shares of TDCC common stock for shares of Splitco common stock at a 10 percent discount, calculated as set forth in this document, to the equivalent per-share value of Olin common stock in an exchange offer based on the 0.87482759 shares of Olin common stock corresponding to each share of Splitco common stock as specified in the Merger Agreement.

If the exchange offer is consummated but is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock on a pro rata basis to TDCC shareholders whose shares of TDCC

 



 

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common stock remain outstanding after the consummation of the exchange offer. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Olin common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to TDCC shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

The exchange agent will hold, for the account of the relevant TDCC shareholders, the global certificate(s) representing all of the outstanding shares of Splitco common stock, pending the consummation of the Merger. Shares of Splitco common stock will not be able to be traded during this period.

Step 5    Merger

Immediately after the Distribution, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and as a wholly-owned subsidiary of Olin. In the Merger, each share of Splitco common stock will be converted into the right to receive Olin common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

Immediately after the consummation of the Merger, approximately 52.7 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger holders of Splitco common stock and approximately 47.3 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger Olin shareholders.

Step 6    Sale of Splitco Securities to Third-Party Investors

As described in Step 3 above, TDCC and Olin expect the Splitco Securities to be transferred by TDCC on or about the closing date of the Merger to investment banks and/or commercial banks in the Debt Exchange in exchange for existing TDCC debt. The Splitco Securities will then be sold by the investment banks and/or commercial banks to third-party investors.

 



 

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Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structures, the corporate structures immediately following the Distribution, and the corporate structures immediately following the consummation of the Transactions contemplated by the Merger Agreement.

 

 

LOGO

 

LOGO

 



 

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LOGO

After completion of all of the steps described above, Olin’s wholly-owned subsidiary, Splitco, will hold DCP through its subsidiaries and will be the obligor under the Splitco Securities, if issued, and the other new indebtedness to be incurred by Splitco on or about the date of the Distribution, which, after the consummation of the Merger, are expected to be guaranteed by Olin.

In connection with the Transactions, on the date of the Distribution, TDCC or its subsidiaries and Splitco or the DCP Subsidiaries will enter into the Additional Agreements relating to, among other things, intellectual property agreements, real property agreements, site and business services agreements, agreements relating to the supply of electricity and agreements for the purchase and sale of certain raw materials and finished products. See “Other Agreements—Other Ancillary Agreements.”

Number of Shares of Splitco Common Stock to Be Distributed to TDCC Shareholders

TDCC is offering to exchange all issued and outstanding shares of Splitco common stock for shares of TDCC common stock validly tendered and not properly withdrawn. Splitco has authorized the issuance of 100,000,000 shares of Splitco common stock. 100,000,000 shares of Splitco common stock will be issued and outstanding and held by TDCC immediately prior to the Distribution. Accordingly, the total number of shares of Splitco common stock to be exchanged for shares of TDCC common stock in this exchange offer will be equal to 100,000,000 shares.

Terms of this Exchange Offer

TDCC is offering to exchange all issued and outstanding shares of Splitco common stock for shares of TDCC common stock. You may tender all, some or none of your shares of TDCC common stock. This document and related documents are being sent to persons who directly held shares of TDCC common stock on

 



 

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September 1, 2015, and brokers, banks and similar persons whose names or the names of whose nominees appear on TDCC’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of TDCC common stock.

TDCC common stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described under “This Exchange Offer—Terms of this Exchange Offer,” on the terms and conditions of this exchange offer and subject to the limitations described below, including the proration provisions. TDCC will promptly return any shares of TDCC common stock that are not accepted for exchange following the expiration of this exchange offer and the determination of the final proration factor, if any, described in the section of this document entitled “This Exchange Offer—Terms of this Exchange Offer.”

For the purposes of illustration, the table below indicates the number of shares of Splitco common stock that you would receive per share of TDCC common stock validly tendered and accepted in this exchange offer, calculated on the basis described under “This Exchange Offer—Terms of this Exchange Offer” and taking into account the upper limit described above, assuming a range of averages of the daily VWAP of TDCC common stock and Olin common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share values of TDCC common stock and Splitco common stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on September 1, 2015, based on the daily VWAPs of TDCC common stock and Olin common stock on August 28, 2015, August 31, 2015, and September 1, 2015. The table also shows the effects of a 5 percent increase or decrease in either or both the calculated per-share values of TDCC common stock and Olin common stock based on changes relative to the values as of September 1, 2015.

 

TDCC common stock

 

Olin common stock

  Calculated
per-share
value of
TDCC
common
stock
    Calculated
per-share
value of
Olin
common
stock
    Calculated
per-share
value of
Splitco
common
stock (1)
    Shares of
Splitco
common stock
to be received
per share of
TDCC
common stock
tendered
    Shares of
Olin
common
stock
to be
received
per share
of TDCC
common
stock (2)
    Calculated
Value
Ratio (3)
 

As of September 1, 2015

 

As of September 1, 2015

    43.1746        19.8043        17.3253        2.7689        2.4223        1.1111   

Down 5%

 

Up 5%

    41.0159        20.7945        18.1916        2.5052        2.1916        1.1111   

Down 5%

 

Unchanged

    41.0159        19.8043        17.3253        2.6304        2.3011        1.1111   

Down 5%

 

Down 5%

    41.0159        18.8141        16.4591        2.7689        2.4223        1.1111   

Unchanged

 

Up 5%

    43.1746        20.7945        18.1916        2.6370        2.3069        1.1111   

Unchanged

 

Down 5%

    43.1746        18.8141        16.4591        2.9146        2.5498        1.1111   

Up 5%

 

Up 5%

    45.3333        20.7945        18.1916        2.7689        2.4223        1.1111   

Up 5%

 

Unchanged

    45.3333        19.8043        17.3253        2.9073        2.5434        1.1111   

Up 5%

 

Down 5%

    45.3333        18.8141        16.4591        2.9318  (4)      2.5648        1.0644   

 

(1) The calculated per-share value of Splitco common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Olin common stock on the NYSE on each of the Valuation Dates, multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger).
(2) Subject to receipt of cash in lieu of fractional shares of Olin common stock. See “This Exchange Offer—Fractional Shares.”
(3) The Calculated Value Ratio equals (i) the calculated per-share value of Splitco common stock multiplied by the exchange ratio, divided by (ii) the calculated per-share value of TDCC common stock.
(4) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 3.0603 shares of Splitco common stock per share of TDCC common stock validly tendered and accepted in this exchange offer. In this scenario, TDCC would announce that the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date, that the exchange ratio would be fixed at the upper limit and this exchange offer would be extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date.

 



 

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During the three-month period of June 1, 2015 through September 1, 2015, the highest closing price of TDCC common stock on the NYSE was $53.59 and the lowest closing price of Olin common stock on the NYSE was $18.77. If the calculated per-share values of TDCC common stock and Splitco common stock were calculated based on these closing prices, you would receive only the limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock tendered, and the value of such shares of Splitco common stock, based on the Olin common stock price multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger), would have been less than the value of TDCC common stock accepted for exchange (approximately $0.90 of Splitco common stock for each $1.00 of TDCC common stock accepted for exchange).

Extension; Termination

This exchange offer, and your withdrawal rights, will expire at 8:00 a.m., New York City time, on October 1, 2015, unless TDCC extends this exchange offer (or with respect to any shares attributable to units of the TDCC Stock Fund allocated to your account under the Dow Savings Plan, by such earlier deadline as established by the Trustee of the plan). You must tender your shares of TDCC common stock prior to this time if you want to participate in this exchange offer. TDCC may extend or terminate this exchange offer as described in this document.

Mandatory Extension

If the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at the last trading day prior to the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their shares of TDCC common stock during those days.

In case of an extension of this exchange offer, TDCC will publicly announce the extension by press release no later than 9:00 a.m., New York City time, on the next business day following any such Mandatory Extension. However, in the case of shares attributable to units of the TDCC Stock Fund held under the Dow Savings Plan, the Trustee may extend the applicable election deadline, to the extent administratively feasible, for participants in the Dow Savings Plan.

Conditions for Consummation of this Exchange Offer

TDCC’s obligation to exchange shares of Splitco common stock for shares of TDCC common stock is subject to the conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer,” including the satisfaction of conditions to the Transactions and other conditions. These conditions include:

 

    the conditions precedent to the consummation of the Transactions (other than this exchange offer) pursuant to the Merger Agreement have been fulfilled or waived (except for conditions that will be fulfilled at consummation) and there is no reason the Transactions cannot be consummated promptly after this exchange offer;

 

    the Merger Agreement and the Separation Agreement have not been terminated;

 

    TDCC’s receipt of the Private Letter Ruling;

 

    the receipt by TDCC of the TDCC RMT Tax Opinion;

 

    the absence of a market disruption event; and

 

    other customary conditions.

 



 

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For a description of the material conditions precedent to the Transactions, see “The Merger Agreement—Conditions to the Merger.”

TDCC may waive any of the conditions to this exchange offer prior to the expiration of this exchange offer. Splitco has no right to waive any of the conditions to this exchange offer.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock

If, upon the expiration of this exchange offer, TDCC shareholders have validly tendered and not properly withdrawn more shares of TDCC common stock than TDCC is able to accept for exchange (taking into account the exchange ratio and the total number of shares of Splitco common stock owned by TDCC), TDCC will accept for exchange the shares of TDCC common stock validly tendered and not properly withdrawn by each tendering shareholder on a pro rata basis, based on the proportion that the total number of shares of TDCC common stock to be accepted bears to the total number of shares of TDCC common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of TDCC common stock), and subject to any adjustment necessary to ensure the exchange of all shares of Splitco common stock owned by TDCC, except for tenders of odd-lots, as described below.

TDCC will announce the preliminary proration factor at www.edocumentview.com/dowexchange and separately by press release as promptly as practicable after the expiration date. Upon determining the number of shares of TDCC common stock validly tendered for exchange, TDCC will announce the final results, including the final proration factor.

Beneficial holders of fewer than 100 shares of TDCC common stock (excluding any shares attributable to units of the TDCC Stock Fund allocated to their account under the Dow Savings Plan) who validly tender all of their shares held outside of the plan may elect not to be subject to proration by completing the box in the applicable letter of transmittal entitled “Odd-Lot Shares.” If your odd-lot shares are held by a broker for your account, you can contact the broker and request this preferential treatment. All of your odd-lot shares will be accepted for exchange without proration if TDCC completes this exchange offer. As outlined above, the foregoing “odd-lots” preference does not apply to shares attributable to units of the TDCC Stock Fund held in participant accounts under the Dow Savings Plan and Trust. Thus, if a participant in the Dow Savings Plan tenders all of his or her shares of TDCC common stock attributable to units of the TDCC Stock Fund held under the plan, those shares will be subject to proration even if the participant holds units under the plan representing fewer than 100 shares.

Fractional Shares

Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin. Each outstanding share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock. In this conversion of shares of Splitco common stock into shares of Olin common stock, no fractional shares of Olin common stock will be delivered to holders of Splitco common stock. All fractional shares of Olin common stock that holders of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by a transfer agent appointed by Olin. The transfer agent will cause the whole shares obtained by such aggregation to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger, in the open market or otherwise, in each case at then-prevailing market prices as soon as practicable after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable following the Merger to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger.

 



 

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Procedures for Tendering

For you to validly tender your shares of TDCC common stock pursuant to this exchange offer, prior to the expiration of this exchange offer:

 

    If you hold certificates representing shares of TDCC common stock, or if your shares of TDCC common stock are held in book-entry via the DRS, or in uncertificated form as CIP shares you must deliver to the exchange agent at the address listed on the letter of transmittal for TDCC common stock you will receive, a properly completed and duly executed letter of transmittal (or a manually executed facsimile of that document) along with any required signature guarantees and any other required documents, and in the case of shares held in certificated form, the certificates representing the shares of TDCC common stock tendered.

 

    If you hold shares of TDCC common stock through a broker, you should receive instructions from your broker on how to participate in this exchange offer. In this situation, do not complete a letter of transmittal to tender your TDCC common stock. Please contact your broker directly if you have not yet received instructions. Some financial institutions may also effect tenders by book-entry transfer through The Depository Trust Company.

 

    If you hold units of the TDCC Stock Fund under the Dow Savings Plan, you should receive instructions from the Trustee via letter or email (as permitted by the Dow Savings Plan) informing you how to make an election. In this situation, do not complete a letter of transmittal to tender your shares of TDCC common stock attributable to such units. You should instead follow the Trustee’s instructions for making an election. Please contact the toll-free plan information line to speak with a customer service associate if you have not yet received instructions.

Notwithstanding anything in this document to the contrary, with respect to shares of TDCC common stock held under the Dow Savings Plan, the terms of such plan and Trust and applicable law govern all transactions involving such shares of TDCC common stock. It is possible that the investment fiduciaries of the Dow Savings Plan, to fulfill their fiduciary obligations, will impose additional conditions and limitations on the participation of the plan and its participants in the exchange offer or will determine that the Olin common stock will not be a permitted investment under the plan. If that is the case, participants in the Dow Savings Plan will be so notified.

Delivery of Shares of Splitco Common Stock

Upon the consummation of this exchange offer, TDCC will deliver to the exchange agent a global certificate representing all of the Splitco common stock being distributed in this exchange offer, with irrevocable instructions to hold the shares of Splitco common stock in trust for the holders of TDCC common stock validly tendered and not withdrawn in this exchange offer and, in the case of a pro rata distribution, holders of TDCC common stock whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. Olin will deposit in a reserve account with its transfer agent for the benefit of persons who received shares of Splitco common stock in this exchange offer book-entry authorizations representing shares of Olin common stock, with irrevocable instructions to hold the shares of Olin common stock in trust for the holders of Splitco common stock. Shares of Olin common stock will be delivered promptly following the expiration of this exchange offer, the acceptance of TDCC common stock for exchange, the determination of the final proration factor, if any, and the effectiveness of the Merger, pursuant to the procedures determined by the exchange agent and Olin’s transfer agent. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of TDCC Common Stock.”

Withdrawal Rights

You may withdraw your tendered shares of TDCC common stock at any time prior to the expiration of this exchange offer by following the procedures described herein. If you change your mind again, you may re-tender your TDCC common stock by again following the exchange offer procedures prior to the expiration of this exchange offer. If you participate in the Dow Savings Plan and have elected to tender shares attributable to units

 



 

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of the TDCC Stock Fund held in your plan account, you may withdraw such tendered shares, and re-tender your shares if you change your mind again, prior to the deadline set forth in the Trustee’s informational materials provided to you, in accordance with the procedures set forth in those materials.

No Appraisal Rights

No appraisal rights are available to holders of TDCC common stock in connection with this exchange offer or any pro rata distribution of shares of Splitco common stock.

Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer

If this exchange offer is consummated but fewer than all of the issued and outstanding shares of Splitco common stock are exchanged because the exchange offer is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. The record date for the pro rata distribution, if any, will be announced by TDCC. Any TDCC shareholder who validly tenders (and does not properly withdraw) shares of TDCC common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to TDCC shareholders in the event the exchange offer is not fully subscribed.

If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Olin common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to TDCC shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

If this exchange offer is terminated by TDCC without the exchange of shares, but the conditions for the consummation of the Transactions have otherwise been satisfied, TDCC intends to distribute all shares of Splitco common stock owned by TDCC on a pro rata basis to holders of TDCC common stock with a record date to be announced by TDCC.

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This document is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of TDCC common stock, Splitco common stock or Olin common stock in any jurisdiction in which the offer, sale or exchange is not permitted. It will not be possible to trade the shares of Splitco common stock after the consummation of this exchange offer and prior to the consummation of the Merger or during any other period. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of TDCC, Splitco or Olin have taken any action under non-U.S. regulations to facilitate a public offer to exchange shares of TDCC common stock, Splitco common stock or Olin common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of TDCC common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for TDCC, Olin or Splitco to take any action to facilitate a public offering in that country. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of TDCC common stock, Splitco common stock or Olin common stock that may apply in their home countries. TDCC, Olin and Splitco cannot provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 



 

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Risk Factors

In deciding whether to tender your shares of TDCC common stock in this exchange offer, you should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this document and the other documents to which you have been referred.

Debt Financing

In connection with the entry into the Merger Agreement, Olin entered into the Commitment Letters, the New Credit Facilities and the Sumitomo Credit Agreement with various lenders pursuant to which those parties agreed to provide various forms of financing to Olin and Splitco in connection with the Transactions. The terms of the debt financing, including any conditions thereto and covenants thereunder, are set out in various definitive documentation entered into or to be entered into by the respective parties. See “Debt Financing.”

Interests of Olin’s Directors and Executive Officers in the Transactions

Certain of Olin’s directors and executive officers have financial interests in the Transactions that may be different from, or in addition to, the interests of Olin’s shareholders generally. The members of the Olin Board were aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the Transactions, including the Merger, and in recommending to Olin’s shareholders that they vote to approve the Share Issuance and the Charter Amendment.

Board of Directors and Management of Olin Following the Transactions

Following the consummation of the exchange offer, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly owned subsidiary of Olin. In connection with the Transactions, the size of the Olin Board will be increased to include three additional directors to be designated by TDCC, effective at the time of closing of the Merger. The Merger Agreement provides that at the next annual election of directors of Olin, the Olin Board will take all actions necessary to include each of the TDCC designees as nominees for the Olin Board for election by Olin’s shareholders. The executive officers of Olin immediately prior to the consummation of the Merger are expected to be the executive officers of Olin immediately following the consummation of the Merger.

Shareholder Approvals

Olin cannot complete the Transactions unless the proposal relating to the Share Issuance is approved by the affirmative vote of a majority of votes cast on the proposal at the special meeting and the proposal relating to the Charter Amendment is approved by the affirmative vote of a majority of the shares of Olin common stock entitled to vote on the proposal. Additionally, TDCC as the sole shareholder of Splitco, and subject to satisfaction of the conditions set out in the Merger Agreement and the Separation Agreement, will approve the Merger prior to the Distribution.

Accounting Treatment and Considerations

ASC 805, Business Combinations, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquiror. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the interests (Olin in this case) is generally the acquiring entity. In identifying the acquiring entity in a combination effected through an exchange of equity interests, however, all pertinent facts and circumstances must be considered, including the following:

 

    Issuance of equity by Olin. Olin expects to issue approximately 87.5 million shares of Olin common stock in the Merger.

 



 

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    Incurrence of debt by Olin and Splitco. Approximately $3,392 million of indebtedness is expected to be incurred under the New Term Facilities, the Sumitomo Term Facility, the Splitco Securities, the Other Splitco Debt Securities and the Bridge Facility. Subsequent to the Merger, Splitco will be a wholly-owned subsidiary of Olin, Splitco’s indebtedness is expected to be guaranteed by Olin, and the indebtedness incurred by Olin to finance the Transactions is expected to be guaranteed by Splitco.

 

    The relative voting interests of Olin shareholders after the consummation of the Transactions. In this case, TDCC shareholders participating in the exchange offer (and pro rata distribution, if any) are expected to receive approximately 52.7 percent of the equity ownership and associated voting rights in Olin after the consummation of the Transactions.

 

    The composition of the governing body of Olin after the consummation of the Transactions. The Olin Board currently consists of nine directors. In this case, the Olin Board immediately following the Merger will consist of the members of the Olin Board immediately prior to the consummation of the Merger. In addition, as of the consummation of the Merger, the size of the Olin Board will be increased to include three additional directors to be designated by TDCC.

 

    The composition of the senior management of Olin after the consummation of the Transactions. In this case, Olin’s executive officers immediately following the Merger are generally expected to consist of Olin’s executive officers immediately prior to the Merger.

Olin’s management has determined that Olin will be the accounting acquiror in the Merger based on the facts and circumstances outlined above and the detailed analysis of the relevant GAAP guidance. Consequently, Olin will apply acquisition accounting to the assets and liabilities of Splitco acquired or assumed upon the consummation of the Merger. The historical financial statements of Olin for periods ended prior to the consummation of the Merger will reflect only the operations and financial condition of Olin.

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

On the basis that the Distribution, together with certain related transactions, qualifies as a “reorganization” for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of TDCC common stock upon the receipt of Splitco common stock in this exchange offer or in any pro rata distribution of Splitco common stock distributed to holders of TDCC common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer).

The consummation of the Distribution (which includes this exchange offer) is conditioned upon the receipt of the Private Letter Ruling (as defined above in “Helpful Information”). Although a private letter ruling from the IRS generally is binding on the IRS, TDCC and Splitco will not be able to rely on the Private Letter Ruling if the factual representations made to the IRS in connection with the Private Letter Ruling request prove to be inaccurate, or incomplete, in any material respect, or if undertakings made to the IRS in connection with the request for the Private Letter Ruling are not satisfied. If the Distribution and/or the Merger fails to qualify for tax-free treatment, TDCC and/or its shareholders will be subject to tax. See “Risk Factors—Risks Related to the Transactions—If the Distribution, including the Debt Exchange, does not qualify as a tax-free transaction under Section 368(a)(1)(D) or 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under section 368(a) of the Code, including as a result of actions taken in connection with the Distribution or the Merger or as a result of subsequent acquisitions of shares of TDCC, Olin or Splitco stock, then TDCC and/or TDCC shareholders may be required to pay substantial U.S. federal income taxes, and in certain circumstances and subject to certain conditions, Splitco and Olin may be required to indemnify TDCC for any such tax liability.”

The U.S. federal income tax rules governing the treatment of the Transactions are complex and the tax consequences of the Transactions to you will depend on the facts of your particular situation. You should read the

 



 

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summary in the section of this document entitled “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger” and consult your own tax advisor for a full understanding of the U.S. federal income tax consequences to you of the Transactions.

TDCC shareholders are urged to consult with their own tax advisors regarding the tax consequences of the Distribution, the Merger and related Transactions to them, as applicable, including the effects of U.S. federal, state, local, foreign and other tax laws.

The Distribution

The consummation of the Distribution and the related Transactions are conditioned upon, among other things, the receipt of the TDCC RMT Tax Opinion from tax counsel to TDCC, substantially to the effect that (among other things) the Distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes. The TDCC RMT Tax Opinion will be based on, among other things, certain facts and assumptions as well as the accuracy of certain representations, statements and undertakings made to counsel. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, the TDCC RMT Tax Opinion may be invalid. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached in the opinion.

On the basis that the Distribution, together with certain related transactions, qualifies as a “reorganization” for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes: (i) no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of TDCC common stock upon the receipt of Splitco common stock in this exchange offer or in any pro rata distribution of Splitco common stock distributed to holders of TDCC common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer); (ii) in a split-off, the aggregate tax basis of the shares of Splitco common stock (including fractional shares) issued to a holder of TDCC common stock will equal the aggregate tax basis of the shares of TDCC common stock exchanged therefor; (iii) the aggregate tax basis of any shares of Splitco common stock (including fractional shares) issued as a pro rata distribution to holders of TDCC common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer) will be determined by allocating the aggregate tax basis of such holder in the shares of TDCC common stock with respect to which the pro rata distribution is made immediately before such distribution between such TDCC common stock and the Splitco common stock in proportion to the relative fair market value of each immediately following such distribution; and (iv) the holding period of any shares of Splitco common stock received by a holder of TDCC common stock will include the holding period at the time of the consummation of this exchange offer of the shares of TDCC common stock with respect to which the shares of Splitco common stock were received, provided that the TDCC common stock is held as a capital asset on the date of the consummation of this exchange offer.

In general, if the Distribution does not qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Code, (i) the exchange offer would be treated as a taxable exchange to TDCC shareholders who receive Splitco common stock in the exchange offer and (ii) the pro rata distribution of Splitco common stock, if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer), would be treated as a taxable dividend to TDCC shareholders who receive such distribution in an amount equal to the fair market value of the Splitco common stock received.

The Merger

On the basis that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, in general, for U.S. federal income tax purposes: (i) no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of Splitco common stock upon the receipt of Olin common stock in the Merger, except for any gain or loss recognized with respect to cash received in lieu of a fractional share of Olin common stock;

 



 

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(ii) gain or loss will be recognized by holders of Splitco common stock on any cash received in lieu of a fractional share of Olin common stock in the Merger equal to the difference between the amount of cash received in lieu of the fractional share and the holder’s tax basis in the fractional share of Olin common stock (determined in the manner described in clause (ii) or (iii), as applicable under the section entitled “—The Distribution”; such gain or loss will be long-term capital gain or loss if the holder’s holding period for all of its Splitco common stock (determined in the manner described in clause (iv) under the section entitled “—The Distribution”) is more than one year as of the closing date of Merger, and the deductibility of capital losses is subject to limitations under the Code; (iii) the tax basis of Olin common stock received in the Merger, including any fractional share of Olin common stock deemed received, will be the same as the tax basis in the shares of Splitco common stock deemed exchanged therefor; and (iv) the holding period of Olin common stock received by a holder of Splitco common stock in the Merger will include the holding period of the Splitco common stock exchanged therefor.

Information Reporting and Backup Withholding

U.S. Treasury regulations generally require holders who own at least five percent of the total outstanding stock of TDCC and who receive Splitco common stock pursuant to the Distribution and holders who own at least one percent of the total outstanding stock of Splitco and who receive Olin common stock pursuant to the Merger to attach to his, her or its U.S. federal income tax return for the year in which the Distribution and the Merger occur a detailed statement setting forth certain information relating to the tax-free nature of the Distribution and the Merger, as the case may be. TDCC and/or Olin will provide the appropriate information to each holder upon request, and each such holder is required to retain permanent records of this information.

In addition, payments of cash to a holder of Splitco common stock in lieu of fractional shares of Olin common stock in the Merger may be subject to information reporting, unless the holder provides proof of an applicable exemption. Such payments that are subject to information reporting may also be subject to backup withholding (currently at a rate of 28 percent), unless such holder provides a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute an additional tax, but merely an advance payment, which may be refunded or credited against a holder’s U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

THE FOREGOING IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS OF THE DISTRIBUTION AND THE MERGER UNDER CURRENT LAW AND FOR GENERAL INFORMATION ONLY. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS. EACH TDCC SHAREHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION AND THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

 



 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary combined financial data of DCP and summary consolidated financial data of TDCC and Olin are being provided to help you in your analysis of the financial aspects of the Transactions. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference in this document. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Dow Chlorine Products Business,” “Where You Can Find More Information; Incorporation by Reference,” “Information on the Dow Chlorine Products Business,” “Information on TDCC,” “Information on Olin,” “Selected Historical Financial Data” and “Unaudited Pro Forma Condensed Combined Financial Statements of Olin and the Dow Chlorine Products Business.”

Summary Historical Combined Financial Data of the Dow Chlorine Products Business

The following summary historical combined financial data of DCP as of and for the six months ended June 30, 2015 and June 30, 2014 has been derived from unaudited combined financial information included in this document. The following summary historical combined financial data of DCP as of and for each of the years ended December 31, 2014, 2013 and 2012 have been derived from audited combined financial statements of DCP included in this document. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Dow Chlorine Products Business,” the financial statements of DCP and the notes thereto and the unaudited pro forma condensed combined financial statements of Olin and the Dow Chlorine Products Business included elsewhere in this document.

 

     As of and for the
Six Months Ended June 30,
    As of and for the
Years Ended December 31,
 
         2015             2014             2014             2013             2012      
     (in millions)  

Results of Operations Data

          

Net sales

   $ 1,885      $ 2,426      $ 4,776      $ 4,375      $ 4,762   

Cost of sales

   $ 1,822      $ 2,348      $ 4,573      $ 4,257      $ 4,350   

Income (loss) before income taxes

   $ (25   $ (21   $ 1      $ (76   $ 185   

Net (loss) income

   $ (26   $ (29   $ (7   $ (49   $ 146   

Balance Sheet Data

          

Total assets

   $ 2,306      $ 2,320      $ 2,275      $ 2,438      $ 2,553   

Working capital(1)

   $ 202      $ 87      $ 61      $ 58      $ 140   

Long-term debt(2)

   $ 528      $ 579      $ 553      $ 578      $ 499   

Total combined equity

   $ 1,054      $ 960      $ 958      $ 1,073      $ 1,137   

Cash Flow Data

          

Cash (used in) provided by operating activities

   $ (65   $ 120      $ 223      $ 148      $ 313   

Cash used in investing activities

   $ (32   $ (49   $ (107   $ (236   $ (542

Cash (used in) provided by financing activities

   $ 97      $ (71   $ (116   $ 88      $ 229   

 

(1) Working capital is defined as current assets less current liabilities.
(2) Consists of debt of the JV Entity, which is non-recourse to DCP.

 



 

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Summary Historical Consolidated Financial Data of TDCC

The following summary historical consolidated financial data of TDCC as of and for the six months ended June 30, 2015 and June 30, 2014 has been derived from the unaudited interim consolidated financial statements of TDCC incorporated by reference in this document. The following summary historical consolidated financial data of TDCC as of and for the years ended December 31, 2014, 2013 and 2012 have been derived from TDCC’s audited consolidated financial statements incorporated by reference in this document. This information is only a summary and should be read in conjunction with the financial statements of TDCC and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in TDCC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and TDCC’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is incorporated by reference in this document. See “Where You Can Find More Information; Incorporation By Reference.”

 

     As of and for the Six Months Ended June 30,     As of and for the Years Ended December 31,  
         2015             2014               2014                 2013                  2012         
     (in millions, except per share data)  

Results of Operations Data

          

Net sales

   $ 25,280      $ 29,378      $ 58,167      $ 57,080      $ 56,786   

Net income

   $ 2,716      $ 2,036      $ 3,839      $ 4,816      $ 1,100   

Per share of common stock:

          

Net income per share—basic

   $ 2.21      $ 1.54      $ 2.91      $ 3.72      $ 0.71   

Net income per share—diluted

   $ 2.15      $ 1.52      $ 2.87      $ 3.68      $ 0.70   

Book value per share

   $ 20.70      $ 22.82      $ 19.71      $ 22.59      $ 17.73   

Balance Sheet Data

          

Total assets

   $ 69,334      $ 68,756      $ 68,796      $ 69,501      $ 69,605   

Long-term debt

   $ 17,833      $ 17,036      $ 18,838      $ 16,820      $ 19,919   

Cash Flow Data

          

Cash provided by operating activities

   $ 2,664      $ 1,970      $ 6,502      $ 7,823      $ 4,075   

Cash used in investing activities

   $ (762   $ (1,468   $ (3,105   $ (1,469   $ (2,687

Cash used in financing activities

   $ (1,280   $ (2,589   $ (3,583   $ (4,731   $ (2,530

 



 

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Summary Historical Consolidated Financial Data of Olin

The following summary historical consolidated financial data of Olin as of and for the six months ended June 30, 2015 and 2014 have been derived from the unaudited financial statements of Olin incorporated by reference in this document and is not necessarily indicative of the results or the financial condition to be expected for the remainder of the year or any future date or period. The data as of and for the years ended December 31, 2014, 2013 and 2012 have been derived from Olin’s audited consolidated financial statements incorporated by reference in this document. Since August 22, 2012, Olin’s summary historical financial data reflects the acquisition of KA Steel. This information is only a summary and should be read in conjunction with the financial statements of Olin and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Olin’s Quarterly Report on Form 10-Q for the three months ended June 30, 2015 and Olin’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is incorporated by reference in this document. See “Where You Can Find More Information; Incorporation by Reference.”

 

    As of and for the Six Months Ended June 30,     As of and for the Years Ended December 31,  
            2015                     2014                     2014                     2013                     2012          
   

(in millions, except per share data)

 

Results of Operations Data

         

Sales

  $ 1,053      $ 1,148      $ 2,241      $ 2,515      $ 2,185   

Cost of goods sold

    879        939        1,853        2,034        1,748   

Selling and administration

    87        85        166        190        177   

Restructuring charges

    2        3        16        6        9   

Acquisitions costs

    21               4                 

Other operating income

    42 (1)             2        1        8   

Earnings of non-consolidated affiliates

    1        1        2        3        3   

Interest expense

    25        19        44        39        26   

Interest and other income (expense)

    1               1               (10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes from continuing operations

    83        103        163        250        226   

Income tax provision

    28        37        58        71        76   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

    55        66        105        179        150   

Discontinued operations, net

           1        1                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 55      $ 67      $ 106      $ 179      $ 150   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(1) Other operating income for the six months ended June 30, 2015 included $42 million of insurance recoveries for property damage and business interruption related to the portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014.

 



 

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    As of and for the Six Months Ended June 30,     As of and for the Years Ended December 31,  
            2015                     2014                     2014                     2013                     2012          
   

(in millions, except per share data)

 

Balance Sheet Data

         

Cash and cash equivalents, short-term investments and restricted cash

  $ 232      $ 248      $ 257      $ 312      $ 177   

Working capital, excluding cash and cash equivalents and short-term investments

    103        239        182        125        150   

Property, plant and equipment, net

    918        951        931        988        1,034   

Total assets

    2,701        2,791        2,698        2,803        2,778   

Capitalization

         

Short-term debt

    144        13        16        13        24   

Long-term debt

    528        677        659        678        690   

Shareholders’ equity

    1,053        1,124        1,013        1,101        998   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total capitalization

    $1,725        $1,814      $ 1,688      $ 1,792      $ 1,712   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Share Data

         

Basic

         

Continuing operations

  $ 0.71      $ 0.84      $ 1.33      $ 2.24      $ 1.87   

Discontinued operations, net

           0.01        0.01                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 0.71      $ 0.85      $ 1.34      $ 2.24      $ 1.87   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

         

Continuing operations

  $ 0.70      $ 0.82      $ 1.32      $ 2.21      $ 1.85   

Discontinued operations, net

           0.01        0.01                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 0.70      $ 0.83      $ 1.33      $ 2.21      $ 1.85   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common cash dividends

  $ 0.40      $ 0.40      $ 0.80      $ 0.80      $ 0.80   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Data

         

Capital expenditures

  $ 51      $ 33      $ 72      $ 91      $ 256   

Depreciation and amortization

    69        69        138        135        111   

Current ratio

    1.7        2.2        2.2        2.1        1.7   

Total debt to total capitalization

    39.0     38.0     40.0     38.6     41.7

Average common shares outstanding—diluted

    78.6        80.2        79.7        80.9        81.0   

 



 

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Summary Unaudited Pro Forma Condensed Combined Financial Data of Olin and the Dow Chlorine Products Business

The following summary unaudited pro forma condensed combined financial data present the pro forma condensed financial position and results of operations of Olin based upon the historical financial statements of each of Olin and DCP, after giving effect to the Merger and the other Transactions, and are intended to reflect the impact of the Merger and the other Transactions on Olin’s consolidated financial statements as if the relevant transactions occurred on the dates indicated below. The accompanying unaudited pro forma condensed combined financial information have been prepared using, and should be read in conjunction with, the respective unaudited consolidated or combined (as the case may be) financial statements of each of Olin and DCP as of and for the six months ended June 30, 2015 and the audited consolidated or combined (as the case may be) financial statements of each of Olin and DCP as of and for the year ended December 31, 2014. The accompanying unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by Olin if the Transactions had been consummated for the period presented or that will be achieved in the future. See “Risk Factors—Risks Related to the Transactions—The unaudited pro forma combined financial information of Olin and DCP is not intended to reflect what actual results of operations and financial condition would have been had Olin and DCP been a combined company for the periods presented, and therefore these results may not be indicative of Olin’s future operating performance.” This information is only a summary and has been derived from and should be read in conjunction with the financial statements of Olin and the notes thereto contained in Olin’s Quarterly Report on Form 10-Q for the three months ended June 30, 2015 and Olin’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is incorporated by reference in this document, the financial statements of DCP and the notes thereto included elsewhere in this document and the more detailed unaudited pro forma condensed combined financial statements of Olin and DCP and the notes thereto included elsewhere in this document. See “Where You Can Find More Information; Incorporation by Reference,” “Unaudited Pro Forma Condensed Combined Financial Statements of Olin and the Dow Chlorine Products Business,” and the audited and unaudited financial statements of the Dow Chlorine Products Business included elsewhere in this document.

 

      Pro Forma    
    As of and for
the Six Months Ended
June 30, 2015
    For the Year
Ended December 31, 2014
 
    (in millions, except per share data)  

Results of operations

   

Net sales

  $ 2,909      $ 6,948   

Cost of goods sold

  $ 2,713      $ 6,362   

Income (loss) from continuing operations

  $ (7   $ 47   

Income (loss) from continuing operations attributable to controlling shareholders

  $ (7   $ 47   

Income (loss) from continuing operations per common share attributable to the business:

   

Basic

  $ (0.04   $ 0.28   

Diluted

  $ (0.04   $ 0.28   

Balance sheet data

   

Total assets

  $ 9,651     

Total liabilities

  $ 6,658     

Other selected data

   

EBITDA (1)

  $ 309      $ 712   

Weighted average common shares outstanding—basic

    165.0        166.1   

Weighted average common shares outstanding—diluted

    165.0        167.2   

 

(1)

Olin’s definition of EBITDA (Earnings before interest, taxes, depreciation, and amortization) is income from continuing operations plus an add-back for depreciation and amortization, interest expense (income), and income tax expense. EBITDA is a non-GAAP financial

 



 

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  measure used by Olin’s management to enhance the understanding of Olin’s operating results. Olin’s management believes that this measure is meaningful to investors as a supplemental financial measure to assess the financial performance of Olin’s assets without regard to financing methods, capital structures, taxes, or historical cost basis. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP and EBITDA presented may not be comparable to similarly titled measures of other companies, limiting its usefulness as a comparative measure. As a result, this financial measure has limitations as an analytical and comparative tool, and you should not consider EBITDA in isolation, or as a substitute for Olin’s results as reported under GAAP. Some of these limitations are:

 

    it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on debt;

 

    it does not reflect income tax expense or the cash requirements to pay taxes; and

 

    although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

A reconciliation of EBITDA to income (loss) determined in accordance with GAAP for the six months ended June 30, 2015 is provided below:

 

     Historical                
     Olin
Corporation
     Dow Chlorine
Products
     Pro forma
adjustments
     Pro forma
combined
 
     (in millions)  

Net income (loss)

   $ 55       $ (26    $ (36    $ (7

Add Back:

           

Interest income

     (1                      (1

Interest expense

     25         6         41         72   

Provision (benefit) for income taxes

     28         1         (22      7   

Depreciation and amortization expense

     69         110         59         238   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 176       $ 91       $ 42       $ 309   

A reconciliation of EBITDA to income (loss) from continuing operations determined in accordance with GAAP for the year ended December 31, 2014 is provided below:

 

     Historical         
     Olin
Corporation
     Dow Chlorine
Products

Business
     Pro forma
adjustments
     Pro forma
combined
 
     (in millions)  

Net income (loss) from continuing operations

   $ 105       $ (7    $ (51    $ 47   

Add Back:

           

Interest income

     (1                      (1

Interest expense

     44         13         97         154   

Provision (benefit) for income taxes

     58         8         (31      35   

Depreciation and amortization expense

     138         221         118         477   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 344       $ 235       $ 133       $ 712   

Included in DCP’s combined statement of operations from which the unaudited pro forma condensed combined financial statements have been derived are allocations of certain expenses for services including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, ethics and compliance, shared services, employee benefits and incentives, insurance and stock-based compensation. These expenses have been allocated on the basis of direct usage when identifiable with the remainder allocated on the basis of headcount or other measures. Olin management estimates that approximately $250 million of annual costs would not have been incurred had DCP been a part of Olin for the year ended December 31, 2014.

The unaudited pro forma condensed combined financial statements also do not reflect benefits that may result from the realization of approximately $200 million of annualized cost synergies expected to be realized

 



 

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within three years following the consummation of the Transactions, or, if Olin is able to increase sales to new third-party customers and access new product markets as a result of the Transactions, the potential additional annualized synergies of up to $100 million that Olin estimates may potentially be achievable within three years from the consummation of the Transactions. Olin expects to incur approximately $100 to $150 million in transition-related costs and approximately $200 million in incremental capital spending during the first three years following the consummation of the Transactions that Olin management believes are necessary to realize the anticipated synergies from the Transactions.

Summary Comparative Historical and Pro Forma Per Share Data

The following table sets forth certain historical and pro forma per share data for Olin. The Olin historical data has been derived from and should be read together with Olin’s unaudited consolidated financial statements and related notes thereto contained in Olin’s Quarterly Report on Form 10-Q for the three months ended June 30, 2015 and Olin’s audited consolidated financial statements and related notes thereto contained in Olin’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is incorporated by reference in this document. See “Where You Can Find More Information; Incorporation by Reference.” The pro forma data has been derived from the unaudited pro forma condensed combined financial statements of Olin and DCP included elsewhere in this document. See the section of this document entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of Olin and the Dow Chlorine Products Business.”

This summary comparative historical and pro forma per share data is being presented for illustrative purposes only. Olin and DCP may have performed differently had the Transactions occurred prior to the periods or at the date presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had Olin and DCP been combined during the periods or at the date presented or of the actual future results or financial condition of Olin or DCP to be achieved following the consummation of the Transactions.

 

     As of and for the Six Months
Ended June 30, 2015
     For the Year Ended
December 31, 2014
 

Olin

   Historical      Pro Forma      Historical      Pro Forma  
     (in millions, except per share data)  

Basic earnings (loss) per share

   $ 0.71       $ (0.04)       $ 1.34       $ 0.28   

Diluted earnings (loss) per share

   $ 0.70       $ (0.04)       $ 1.33       $ 0.28   

Weighted average common shares outstanding—Basic

     77.5         165.0         78.6         166.1   

Weighted average common shares outstanding—Diluted

     78.6         165.0         79.7         167.2   

Book value per share of common stock

   $ 13.59       $ 18.14         

Dividends declared per share of common stock

   $ 0.40       $ 0.40       $ 0.80       $ 0.80   

Historical Common Stock Market Price and Dividend Data

Historical market price data for Splitco has not been presented as DCP is currently operated by TDCC and there is no established trading market in Splitco common stock. Shares of Splitco common stock do not currently trade separately from TDCC common stock.

Shares of TDCC common stock currently trade on the NYSE under the symbol “DOW.” On March 26, 2015, the last trading day before the announcement of the Transactions, the last sale price of TDCC common stock reported by the NYSE was $46.86. On September 1, 2015, the last trading day prior to this document, the last sale price of TDCC common stock reported by the NYSE was $41.66.

Shares of Olin common stock currently trade on the NYSE under the symbol “OLN.” On March 26, 2015, the last trading day before the announcement of the Transactions, the last sale price of Olin common stock reported by the NYSE was $27.19. On September 1, 2015, the last trading day prior to this document, the last sale price of Olin common stock reported by the NYSE was $19.65.

 



 

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The following table sets forth the high and low sale prices of TDCC common stock and Olin common stock on the NYSE for the periods indicated as well as the dividends per share declared by TDCC to holders of TDCC common stock and by Olin to holders of Olin common stock for these periods. The quotations are as reported in published financial sources.

 

    TDCC Per
Share
Dividends
   

 

TDCC Common Stock

    Olin Per
Share
Dividends
   

 

Olin Common Stock

 
          High             Low               High             Low      

Year Ending December 31, 2015

       

First Quarter

    $0.42        $50.22        $41.95        $0.20        $34.34        $22.00   

Second Quarter

    $0.42        $53.77        $47.21        $0.20        $32.56        $26.77   

Third Quarter (through September 1, 2015)

           $53.20        $35.11        $0.20  (1)      $27.18        $18.61   

Year Ended December 31, 2014

           

First Quarter

    $0.37        $50.96        $41.82        $0.20        $29.18        $24.51   

Second Quarter

    $0.37        $53.35        $46.56        $0.20        $29.28        $26.42   

Third Quarter

    $0.37        $54.97        $50.34        $0.20        $28.08        $25.23   

Fourth Quarter

    $0.42        $53.80        $41.45        $0.20        $25.97        $20.43   

Year Ended December 31, 2013

       

First Quarter

    $0.32        $34.83        $30.63        $0.20        $25.42        $21.29   

Second Quarter

    $0.32        $36.00        $29.81        $0.20        $26.05        $22.74   

Third Quarter

    $0.32        $41.08        $32.05        $0.20        $25.17        $22.50   

Fourth Quarter

    $0.32        $44.99        $38.04        $0.20        $29.52        $21.79   

Year Ended December 31, 2012

       

First Quarter

    $0.25        $36.00        $29.27        $0.20        $23.46        $19.75   

Second Quarter

    $0.32        $36.08        $29.27        $0.20        $22.24        $18.40   

Third Quarter

    $0.32        $32.48        $28.45        $0.20        $23.48        $19.34   

Fourth Quarter

    $0.32        $32.95        $27.45        $0.20        $22.32        $19.50   

 

(1) On July 23, 2015, the Olin Board declared a dividend of $0.20 per share of Olin common stock, payable on September 10, 2015 to shareholders of record on August 10, 2015.

 



 

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RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained and incorporated by reference in this document and the exhibits hereto. Some of the risks described below relate principally to the business and the industry in which Olin, including DCP, will operate after the consummation of the Transactions, while others relate principally to the Transactions and participation in this exchange offer. The remaining risks relate principally to the securities markets generally and ownership of shares of Olin common stock. The risks described below are not the only risks that Olin currently faces or will face after the consummation of the Transactions. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect Olin’s business and financial condition or the price of Olin common stock following the consummation of the Transactions.

Risks Related to the Transactions

The Transactions may not be completed on the terms or timeline currently contemplated, or at all.

The consummation of the Transactions is subject to numerous conditions, including (1) the expiration or termination of any applicable waiting period under the HSR Act, and the receipt of regulatory approvals in certain other jurisdictions, (2) the effectiveness of registration statements filed with the SEC in connection with the Transactions, (3) the approval by Olin’s shareholders of the Share Issuance and the Charter Amendment, (4) the receipt by TDCC of the IRS Private Letter Ruling and an opinion from its counsel with respect to certain federal income tax matters related to the Separation, Contribution, Distribution and Debt Exchange, (5) the receipt by TDCC, on the one hand, and Olin, on the other hand, of an opinion from their respective counsel to the effect that the Merger will be treated as a “reorganization” for U.S. federal income tax purposes, (6) the consummation of the Debt Exchange (unless TDCC elects to receive cash equal to the Above Basis Amount as described in the section of this document entitled “The Merger Agreement—Debt Exchange”) and (7) other customary closing conditions. See “The Merger Agreement—Conditions to the Merger.” On June 16, 2015, Olin announced that the waiting period applicable to the Merger under the HSR Act expired and on July 6, 2015 Olin announced that all foreign regulatory approvals required to close the Merger had been obtained. On July 17, 2015, TDCC announced that it had received a favorable private letter ruling from the IRS with respect to certain aspects of the Separation and Distribution. However, there is no assurance that the Transactions will be consummated on the terms or timeline currently contemplated, or at all. Olin and TDCC have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory and financial services fees related to the Transactions. These expenses must be paid regardless of whether the Transactions are consummated.

Olin and Splitco will need to obtain debt financing to complete the Transactions. Although the Commitment Letters have been obtained from various lenders, the obligations of the lenders under the Commitment Letters are subject to the satisfaction or waiver of customary conditions, including, among others, the absence of any “material adverse effect,” as the term is described in “The Merger Agreement—Representations and Warranties.” Accordingly, there can be no assurance that these conditions will be satisfied or, if not satisfied, waived by the lenders. If Olin is not able to obtain alternative financing on commercially reasonable terms, it could prevent the consummation of the Merger or materially and adversely affect Olin’s business, liquidity, financial condition and results of operations if the Merger is ultimately consummated.

The calculation of the merger consideration will not be adjusted if there is a change in the value of DCP or its assets or the value of Olin before the Merger is completed.

The calculation of the number of shares of Olin common stock to be distributed in the Merger will not be adjusted if there is a change in the value of DCP or its assets or the value of Olin prior to the consummation of the Merger. Olin will not be required to consummate the Merger if there has been any “material adverse effect”

 

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(as this term is described in the section of this document entitled “The Merger Agreement—Representations and Warranties”) on DCP. However, Olin will not be permitted to terminate the Merger Agreement or re-solicit the vote of Olin shareholders because of any changes in the market prices of Olin’s common stock or any changes in the value of DCP that do not constitute a material adverse effect on DCP.

Olin will incur significant costs related to the Transactions that could have a material adverse effect on its liquidity, cash flows and operating results.

Olin expects to incur significant one-time costs in connection with the Transactions, including approximately (1) $55 to $60 million during 2015 of advisory, legal, accounting, integration and other professional fees related to the Transactions, (2) $25 to $30 million of financing-related fees, (3) $50 million of costs associated with the change in control mandatory acceleration of expenses under deferred compensation plans as a result of the Transactions, (4) $100 to $150 million in transition-related costs during the first three years following the consummation of the Transactions, and (5) $200 million in incremental capital spending during the first three years following the consummation of the Transactions that Olin management believes is necessary to realize the anticipated synergies from the Transactions. The incurrence of these costs may have a material adverse effect on Olin’s liquidity, cash flows and operating results in the periods in which they are incurred.

Current Olin shareholders’ percentage ownership interest in Olin will be substantially diluted in the Merger.

After the consummation of the Merger, the Olin common stock outstanding immediately prior to the consummation of the Merger will represent, in the aggregate, approximately 47.3 percent of Olin’s issued and outstanding shares of common stock. In addition, as a result of the true-up provision in the Merger Agreement, it is possible that Olin could be required to issue additional shares of its common stock in the Merger. See “The Merger Agreement—Merger Consideration.” Consequently, Olin’s pre-Merger shareholders, as a group, will be able to exercise less influence over the management and policies of Olin following the consummation of the Merger than immediately prior to the consummation of the Merger.

Some of Olin’s directors and executive officers have interests in seeing the Transactions completed that may be different from, or in addition to, those of other Olin shareholders. Therefore, some of Olin’s directors and executive officers may have a conflict of interest in recommending the proposals being voted on at Olin’s special meeting.

In considering the recommendations of the Olin Board that Olin’s shareholders vote to approve the Share Issuance and the Charter Amendment, you should be aware that certain of Olin’s directors and executive officers have financial interests in the Transactions that may be different from, or in addition to, the interests of Olin’s shareholders generally. The members of the Olin Board were aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the Transactions, including the Merger, and in recommending to Olin’s shareholders that they vote to approve the Share Issuance and the Charter Amendment.

The interests of Olin’s non-employee directors generally include the right to receive, upon the effective time of the Merger, accelerated payment of amounts related to previously earned cash and stock retainers deferred under Olin’s Amended and Restated 1997 Stock Plan for Non-employee Directors (the “Directors Plan”), payable as a lump-sum cash amount.

The interests of Olin’s executive officers generally include the rights to receive:

 

    upon the effective time of the Merger, accelerated payment of benefits under each of Olin’s Senior Executive Pension Plan, as amended, and Olin’s Supplementary and Deferral Benefit Pension Plan, as amended (together, the “Supplemental Pension Plans”), in each case, payable as a lump-sum cash payment that is sufficient to purchase an annuity that will provide the executive officer with the same after-tax benefit he or she would have received under the applicable Supplemental Pension Plan;

 

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    upon the effective time of the Merger, accelerated payment of the executive officer’s account balance under Olin’s Supplemental Contributing Employee Ownership Plan, as amended (the “Supplemental CEOP,” and collectively with the Directors Plan and the Supplemental Pension Plan, the “Deferred Compensation Plans”), payable as a lump-sum cash amount; and

 

    in the event of a qualifying termination of employment, certain contractual severance payments and benefits.

The executive officers of Olin immediately prior to the Merger are generally expected to be the executive officers of Olin immediately after the Merger. For a description and quantification of the benefits that the Olin directors and executive officers may receive as a result of these interests, see “The Transactions—Interests of Olin’s Directors and Executive Officers in the Transactions.”

Sales of Olin common stock after the Transactions may negatively affect the market price of Olin common stock.

The shares of Olin common stock to be issued in the Merger to holders of Splitco common stock will generally be eligible for immediate resale. The market price of Olin common stock could decline as a result of sales of a large number of shares of Olin common stock in the market after the consummation of the Transactions or even the perception that these sales could occur.

Currently, TDCC shareholders may include index funds that have performance tied to the Standard & Poor’s 500 Index or other stock indices, and institutional investors subject to various investing guidelines. Because Olin may not be included in these indices following the consummation of the Transactions or may not meet the investing guidelines of some of these institutional investors, these index funds and institutional investors may decide to or may be required to sell the Olin common stock that they receive in the Merger. In addition, the investment fiduciaries of TDCC’s defined benefit pension plans may decide to sell any Olin common stock that the trusts for these plans receive in the Transactions, or may decide not to participate in this exchange offer, in response to their fiduciary obligations under applicable law. Similarly, the fiduciaries to the Dow Savings Plan may determine that Olin common stock is not a permissible investment under the Dow Savings Plan, triggering a sale of Olin common stock (or possibly even precluding applicants from participating in this exchange). These sales, or the possibility that these sales may occur, may also make it more difficult for Olin to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

The historical financial information of DCP may not be representative of its results or financial condition if it had been operated independently of TDCC and, as a result, may not be a reliable indicator of its future results.

DCP is currently operated by TDCC. Consequently, the financial information of DCP included in this document has been derived from the consolidated financial statements and accounting records of TDCC and reflects all direct costs as well as assumptions and allocations made by TDCC management. The financial position, results of operations and cash flows of DCP presented may be different from those that would have resulted had DCP been operated independently of TDCC during the applicable periods or at the applicable dates. For example, in preparing the financial statements of DCP, TDCC made allocations of costs and TDCC corporate expenses deemed to be attributable to DCP. However, these costs and expenses reflect the costs and expenses attributable to DCP operated as part of a larger organization and do not necessarily reflect costs and expenses that would be incurred by DCP had it been operated independently. As a result, the historical financial information of DCP may not be a reliable indicator of future results.

The unaudited pro forma combined financial information of Olin and DCP is not intended to reflect what actual results of operations and financial condition would have been had Olin and DCP been a combined company for the periods presented, and therefore these results may not be indicative of Olin’s future operating performance.

Because Olin will acquire DCP only upon completion of the Transactions, it has no available historical financial information that consolidates the financial results for DCP and Olin. The historical financial statements contained or incorporated by reference in this document consist of the separate financial statements of TDCC, DCP and Olin.

 

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The unaudited pro forma combined financial information presented in this document is for illustrative purposes only and is not intended to, and does not purport to, represent what Olin’s actual results or financial condition would have been if the Transactions had occurred on the relevant date. In addition, such unaudited pro forma combined financial information is based in part on certain assumptions regarding the Transactions that Olin believes are reasonable. These assumptions, however, are only preliminary and will be updated only after the consummation of the Transactions. The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting, with Olin considered the acquirer of DCP. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values with any excess purchase price allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the fair values of the tangible and intangible assets and liabilities of DCP. In arriving at the estimated fair values, Olin has considered the preliminary appraisals of independent consultants which were based on a preliminary and limited review of the assets and liabilities related to DCP to be transferred to, or assumed by, Splitco in the Transactions. Following the effective date of the Merger, Olin expects to complete the purchase price allocation after considering the fair value of DCP’s assets and liabilities at the level of detail necessary to finalize the required purchase price allocation. The final purchase price allocation may be different than that reflected in the pro forma purchase price allocation presented herein, and this difference may be material.

The unaudited pro forma combined financial information does not reflect the costs of any integration activities or transaction-related costs or incremental capital spending that Olin management believes are necessary to realize the anticipated synergies from the Transactions. Accordingly, the pro forma financial information included in this document does not reflect what Olin’s results of operations or operating condition would have been had Olin and DCP been a consolidated entity during all periods presented, or what Olin’s results of operations and financial condition will be in the future.

Olin may be unable to provide the same types and level of benefits, services and resources to DCP that historically have been provided by TDCC, or may be unable to provide them at the same cost.

As part of TDCC, DCP has been able to receive benefits and services from TDCC and has been able to benefit from TDCC’s financial strength and extensive business relationships. After the consummation of the Transactions, DCP will be owned by Olin and will no longer benefit from TDCC’s resources. While Olin will enter into agreements under which TDCC will agree to provide certain transition services and site-related services following the consummation of the Transactions, it cannot be assured that Olin will be able to adequately replace those resources or replace them at the same cost. If Olin is not able to replace the resources provided by TDCC or is unable to replace them at the same cost or is delayed in replacing the resources provided by TDCC, Olin’s business, financial condition and results of operations may be materially adversely impacted.

Olin’s business, financial condition and results of operations may be adversely affected following the Transactions if Olin cannot negotiate contract terms that are as favorable as those TDCC has received when Olin replaces certain of Splitco’s contracts after the closing of the Transactions.

Prior to the consummation of the Transactions, certain functions (such as purchasing, accounts payable processing, accounts receivable management, information systems, logistics and distribution) for DCP are generally being performed under TDCC’s centralized systems and, in some cases, under contracts that are also used for TDCC’s other businesses and which are not intended to be assigned in whole or in part to Olin with DCP. In addition, some other contracts to which TDCC is a party on behalf of DCP will require consents of third parties to assign them to Splitco. There can be no assurance that Olin will be able to negotiate contract terms that are as favorable as those TDCC received when and if Olin replaces these contracts with its own agreements for similar services, including any contracts that may need to be replaced as a result of a failure to obtain required third-party consents. Although Olin believes that it will be able to enter into new agreements for similar services and that TDCC and Olin will be able to obtain all material third-party consents required to assign contracts to Splitco, it is possible that the failure to enter into new agreements for similar services or to obtain required consents to assign contracts could have a material adverse impact on Olin’s business, financial condition and results of operations following the consummation of the Transactions.

 

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If the Distribution, including the Debt Exchange, does not qualify as a tax-free transaction under Section 368(a)(1)(D) or 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the Distribution or the Merger or as a result of subsequent acquisitions of shares of TDCC, Olin or Splitco common stock, then TDCC and/or TDCC shareholders may be required to pay substantial U.S. federal income taxes, and, in certain circumstances and subject to certain conditions, Splitco and Olin may be required to indemnify TDCC for any such tax liability.

The consummation of the Transactions is conditioned on TDCC’s receipt of the Private Letter Ruling. The consummation of the Transactions is also conditioned on the receipt by TDCC of the TDCC RMT Tax Opinion (as defined above in “Helpful Information”), and by Olin of the Merger Tax Opinion (as defined in the section of this document entitled “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger—The Merger”).

On July 17, 2015, TDCC announced that it had received a favorable private letter ruling from the IRS with respect to certain aspects of the Separation and Distribution. Although a private letter ruling from the IRS generally is binding on the IRS, TDCC and Splitco will not be able to rely on the Private Letter Ruling if the factual representations made to the IRS in connection with the request for the Private Letter Ruling prove to be inaccurate, or incomplete, in any material respect, or if undertakings made to the IRS in connection with the request for the Private Letter Ruling are not satisfied. In addition, the TDCC RMT Tax Opinion and the Merger Tax Opinion will be based on, among other things, currently applicable law and certain representations and assumptions as to factual matters made by TDCC, Splitco, Olin, and Merger Sub. Any change in currently applicable law, which may be retroactive, or the failure of any representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in the opinions. See “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

Even if the Distribution were otherwise to qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Code, it would be taxable to TDCC (but not to TDCC shareholders) pursuant to Section 355(e) of the Code if there is a 50 percent or greater change in ownership of either TDCC or Splitco (including stock of Olin after the Merger), directly or indirectly, as part of a plan or series of related transactions that include the Distribution. For this purpose, any acquisitions of TDCC, Splitco or Olin stock within the period beginning two years before the Distribution and ending two years after the Distribution are presumed to be part of such a plan, although TDCC, Splitco or Olin may be able to rebut that presumption. While the Merger will be treated as part of such a plan for purposes of the test, standing alone it should not cause the Distribution to be taxable to TDCC under Section 355(e) of the Code because TDCC shareholders will hold at least 50.5 percent of Olin’s outstanding stock immediately following the Merger. However, if the IRS were to determine that other acquisitions of TDCC, Splitco or Olin stock, either before or after the Distribution, were part of a plan or series of related transactions that included the Distribution, such determination could result in significant tax to TDCC. In connection with the Private Letter Ruling and the TDCC RMT Tax Opinion, TDCC and Olin have represented or will represent that the Distribution is not part of any such plan or series of related transactions.

In certain circumstances and subject to certain limitations, under the Tax Matters Agreement, Splitco is required to indemnify TDCC in the event that the Distribution becomes taxable as a result of certain actions by Olin or Splitco (a “disqualifying action”) or as a result of certain changes in ownership of the stock of Olin or Splitco after the Merger. If TDCC were to recognize gain on the Distribution for reasons not related to a disqualifying action by Splitco or Olin, TDCC would not be entitled to be indemnified under the Tax Matters Agreement and the resulting tax to TDCC could have a material adverse effect on TDCC. If Splitco is required to indemnify TDCC if the Distribution or the Merger is taxable, this indemnification obligation would be substantial and could have a material adverse effect on Olin, including with respect to its financial condition and results of operations.

 

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Splitco and Olin may be affected by significant restrictions following the Transactions in order to avoid significant tax-related liabilities.

The Tax Matters Agreement generally prohibits Splitco, Olin and their affiliates from taking certain actions that could cause the Distribution, the Merger and certain related transactions to fail to qualify as tax-free transactions. In particular, unless an exception applies, for a two-year period following the date of the Distribution, Splitco may not:

 

    enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50 percent or more of the vote or value of Splitco (taking into account the stock of Splitco acquired pursuant to the Merger);

 

    redeem or repurchase any stock or stock rights;

 

    amend its certificate of incorporation or take any other action affecting the relative voting rights of its capital stock;

 

    merge or consolidate with any other person (other than pursuant to the Merger);

 

    take any other action that would, when combined with any other direct or indirect changes in ownership of Splitco capital stock (including pursuant to the Merger), have the effect of causing one or more persons to acquire stock comprising 50 percent or more of the vote or value of Splitco, or would reasonably be expected to adversely affect the tax-free status of the Transactions;

 

    discontinue the active conduct of DCP; or

 

    sell, transfer or otherwise dispose of assets (including stock of subsidiaries) that constitute more than 35 percent of the consolidated gross assets of Splitco and/or its subsidiaries (subject to exceptions for, among other things, ordinary course dispositions and repayments or prepayments of Splitco debt).

If Splitco intends to take any such restricted action, Splitco will be required to cooperate with TDCC in obtaining a supplemental IRS ruling or an unqualified tax opinion acceptable to TDCC to the effect that such action will not affect the status of the Distribution, the Merger and certain related transactions as tax-free transactions. However, if Splitco takes any of the actions above and such actions result in tax-related losses to TDCC, then Splitco generally will be required to indemnify TDCC for such losses, without regard to whether TDCC has given Splitco prior consent. See “Other Agreements—Tax Matters Agreement.”

Due to these restrictions and indemnification obligations under the Tax Matters Agreement, Olin may be limited in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in Olin’s best interests. Also, Olin’s potential indemnity obligation to TDCC might discourage, delay or prevent a change of control during this two-year period that Olin shareholders may consider favorable to its ability to pursue strategic transactions, equity or convertible debt financings, or other transactions that may otherwise be in Olin’s best interests.

Failure to consummate the Transactions could materially and adversely impact the market price of Olin’s common stock as well as Olin’s business, liquidity, financial condition and results of operations.

If the Transactions are not consummated for any reason, the price of Olin common stock may decline significantly. In addition, Olin is subject to additional risks, including, among others:

 

    depending on the reasons for and timing of the termination of the Merger Agreement, the requirement in the Merger Agreement that Olin pay TDCC a termination fee of $100 million or reimburse TDCC for expenses of up to $50 million relating to the Transactions;

 

    substantial costs related to the Transactions, such as advisory, legal, accounting, integration and other professional fees and regulatory filing and financial printing fees, which must be paid regardless of whether the Transactions are completed; and

 

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    potential disruption of the business of Olin and distraction of its workforce and management team.

Tendering TDCC shareholders may receive a reduced premium or may not receive any premium in this exchange offer.

This exchange offer is designed to permit you to exchange your shares of TDCC common stock for shares of Splitco common stock at a 10 percent discount, calculated as set forth in this document, to the per-share value of Splitco common stock. Stated another way, for each $1.00 of your TDCC common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The value of the TDCC common stock will be based on the calculated per-share value for the TDCC common stock on the NYSE and the value of the Splitco common stock will be based on the simple arithmetic average of the daily VWAP of Olin common stock on the NYSE on each of the Valuation Dates multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger), in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates.

The number of shares you can receive is, however, subject to an upper limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock accepted in this exchange offer. As a result, you may receive less than $1.11 of Splitco common stock for each $1.00 of TDCC stock, depending on the calculated per-share values of TDCC common stock and Splitco common stock at the expiration date. Because of the limit on the number of shares of Splitco common stock you may receive in this exchange offer, if there is a drop of sufficient magnitude in the trading price of Olin common stock relative to the trading price of TDCC common stock, or if there is an increase of sufficient magnitude in the trading price of TDCC common stock relative to the trading price of Olin common stock, you may not receive $1.11 of Splitco common stock for each $1.00 of TDCC common stock, and could receive much less.

For example, if the calculated per-share value of TDCC common stock was $53.59 (the highest closing price for TDCC common stock on the NYSE during the three-month period prior to commencement of this exchange offer) and the calculated per-share value of Splitco common stock was $16.42 (based on the lowest closing price for Olin common stock on the NYSE during that three-month period), the value of Splitco common stock, based on the Olin common stock price multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger), received for TDCC common stock accepted for exchange would be approximately $0.90 for each $1.00 of TDCC common stock accepted for exchange.

This exchange offer does not provide for a lower limit or minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” If the upper limit on the number of shares of Splitco common stock that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to validly tender or properly withdraw their TDCC common stock during those days. Any changes in the prices of TDCC common stock or Olin common stock on those additional days of this exchange offer will not, however, affect the exchange ratio.

If the trading price of TDCC common stock were to increase during the period of the Valuation Dates, the average TDCC stock price used to calculate the exchange ratio would likely be lower than the closing price of TDCC common stock on the final Valuation Date for this exchange offer. As a result, you may receive fewer shares of Splitco common stock, and therefore effectively fewer shares of Olin common stock, for each $1.00 of shares of TDCC common stock than you would have if the average TDCC stock price were calculated on the basis of the closing price of shares of TDCC common stock on the final Valuation Date for this exchange offer. Similarly, if the trading price of Olin common stock were to decrease during the Valuation Dates, the average Olin stock price used to calculate the exchange ratio would likely be higher than the closing price of Olin common stock on the final Valuation Date for this exchange offer. This could also result in your receiving fewer

 

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shares of Splitco common stock, and therefore effectively fewer shares of Olin common stock, for each $1.00 of TDCC common stock than you would otherwise receive if the average Olin common stock price were calculated on the basis of the closing price of Olin common stock on the final Valuation Date for this exchange offer.

In addition, there is no assurance that holders of shares of TDCC common stock that are exchanged for Splitco common stock in this exchange offer will be able to sell the shares of Olin common stock after receipt in the Merger at prices comparable to the calculated per-share value of Splitco common stock at the expiration date.

The trading prices of Olin common stock may not be an appropriate proxy for the prices of Splitco common stock.

The calculated per-share value for Splitco common stock is based on the trading prices for Olin common stock, which may not be an appropriate proxy for the prices of Splitco common stock. There is currently no trading market for Splitco common stock and no such market will be established in the future. Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, and Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin. In the Merger, each outstanding share of Splitco common stock will be converted automatically into the right to receive 0.87482759 shares of common stock of Olin. There can be no assurance, however, that common stock of Olin after the Merger will trade on the same basis as Olin common stock traded prior to the consummation of the Merger. In addition, it is possible that the trading prices of Olin common stock prior to the consummation of the Merger will not be indicative of the anticipated value of common stock of Olin after the Merger. For example, trading prices of Olin common stock on the Valuation Dates could reflect some uncertainty as to the timing or the consummation of the Merger or could reflect trading activity by investors seeking to profit from market arbitrage.

Olin will have more shares of its common stock outstanding after the Transactions, which may discourage other companies from trying to acquire Olin.

Olin expects to issue approximately 87.5 million shares of its common stock in the Merger. In addition, as a result of the true-up provision in the Merger Agreement in certain circumstances, it is possible that Olin could be required to issue more than 87.5 million shares of its common stock in the Merger. See “The Merger Agreement—Merger Consideration.” Because Olin will be a significantly larger company and have significantly more shares of its common stock outstanding after the consummation of the Transactions, an acquisition of Olin may become more expensive. As a result, some companies may not seek to acquire Olin, and the reduction in potential parties that may seek to acquire Olin could negatively impact the prices at which Olin’s common stock trades.

Following the conversion of shares of Splitco common stock into Olin common stock in the Merger, the former holders of shares of Splitco common stock may experience a delay prior to receiving their shares of Olin common stock or their cash in lieu of fractional shares, if any.

Following the conversion of shares of Splitco common stock into shares of Olin common stock in the Merger, the former holders of Splitco common stock will receive their shares of Olin common stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the exchange agent. Until the distribution of the shares of Olin common stock to a particular shareholder has been completed, that shareholder will not be able to sell its shares of Olin common stock. Consequently, if the market price for Olin common stock decreases during the period before the distribution of the shares of Olin common stock to that shareholder, the relevant shareholder would not be able to stop any losses by selling the shares of Olin common stock. Similarly, until the distribution of cash in lieu of fractional shares to the relevant shareholder has been made, that shareholder will not be able to invest the cash, and it will not receive interest payments for this time period.

Olin may waive one or more of the conditions to the consummation of the Transactions without re-soliciting shareholder approval.

Olin may determine to waive, in whole or in part, one or more of the conditions to its obligations to consummate the Transactions, to the extent permitted by applicable law. If Olin waives the satisfaction of a

 

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material condition to the consummation of the Transactions, Olin will evaluate the appropriate facts and circumstances at that time and re-solicit shareholder approvals of the Share Issuance if required to do so by law or the rules of the NYSE. In some cases, if the Olin Board determines that such waiver or its effect on Olin’s shareholders does not rise to the level of materiality that would require re-solicitation of proxies pursuant to applicable law or the rules of the NYSE, Olin would complete the Merger without seeking further shareholder approval.

Other Risks that Relate to Olin Including the Dow Chlorine Products Business After the Consummation of the Transactions

Integration—The integration of Olin and DCP may not be successful or the anticipated benefits from the Transactions may not be realized.

After the consummation of the Transactions, Olin will have significantly more sales, assets and employees than it did prior to the consummation of the Transactions. The integration process will require Olin to expend capital and significantly expand the scope of its operations and financial systems. Olin’s management will be required to devote a significant amount of time and attention to the process of integrating the operations of Olin’s business and DCP. There is a significant degree of difficulty and management involvement inherent in that process. These difficulties include, but are not limited to:

 

    integrating the operations of DCP while carrying on the ongoing operations of Olin’s business;

 

    managing a significantly larger company than before the consummation of the Transactions;

 

    the possibility of faulty assumptions underlying Olin’s expectations regarding the integration process;

 

    coordinating a greater number of diverse businesses located in a greater number of geographic locations, including in global regions and countries where Olin does not currently have operations;

 

    operating in geographic markets or industry sectors in which Olin may have little or no experience;

 

    complying with laws of new jurisdictions in which Olin has not previously operated;

 

    integrating business systems and models;

 

    attracting and retaining the necessary personnel associated with DCP following the consummation of the Transactions;

 

    creating and implementing uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters; and

 

    integrating information technology, purchasing, accounting, finance, sales, billing, payroll and regulatory compliance systems, and meeting external reporting requirements following the consummation of the Transactions.

All of the risks associated with the integration process could be exacerbated by the fact that Olin may not have a sufficient number of employees with the requisite expertise to integrate the businesses or to operate Olin’s business after the Transactions. If Olin does not hire or retain employees with the requisite skills and knowledge to run Olin after the Transactions, it may have a material adverse effect on Olin’s business, financial condition and results of operations.

Even if Olin is able to combine the two business operations successfully, it may not be possible to realize the benefits of the increased sales volume and other benefits, including the expected synergies, that are expected to result from the Transactions, or realize these benefits within the time frame that is expected. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Transactions may be offset by costs incurred or delays in integrating the companies. In addition, the quantification of synergies expected to result from the Transactions is based on significant estimates and assumptions that are

 

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subjective in nature and inherently uncertain. The amount of synergies actually realized in the Transactions, if any, and the time periods in which any such synergies are realized, could differ materially from the expected synergies discussed in this document, regardless of whether Olin is able to combine the two business operations successfully.

If Olin is unable to successfully integrate DCP or if it is unable to realize the anticipated synergies and other benefits of the Transactions, there could be a material adverse effect on Olin’s business, financial condition and results of operations.

Sensitivity to Global Economic Conditions and Cyclicality—Olin’s operating results could be negatively affected during economic downturns.

The business of most of Olin’s customers, particularly vinyl, urethanes and pulp and paper customers, are and will continue to be, to varying degrees, cyclical and have historically experienced periodic downturns. These economic and industry downturns have been characterized by diminished product demand, excess manufacturing capacity and, in some cases, lower average selling prices. Therefore, any significant downturn in Olin’s customers’ businesses or in global economic conditions could result in a reduction in demand for Olin’s products and could materially adversely affect Olin’s results of operations or financial condition.

Although Olin historically has not generally sold a large percentage of its products directly to customers abroad, a large part of Olin’s financial performance is dependent upon a healthy economy beyond North America because Olin’s customers sell their products abroad. Additionally, the percentage of Olin’s sales to customers abroad is expected to increase significantly following the consummation of the Transactions since DCP derives a larger portion of its sales from customers outside the United States. As a result, Olin’s business is and, following the consummation of the Transactions, will continue to be affected by general economic conditions and other factors in Western Europe, South America and most of East Asia, particularly China and Japan, including fluctuations in interest rates, customer demand, labor and energy costs, currency changes and other factors beyond Olin’s control. The demand for Olin’s customers’ products, and therefore, Olin’s products, is directly affected by such fluctuations. In addition, Olin’s customers could decide to move some or all of their production to lower cost, offshore locations, and this could reduce demand in North America for Olin’s products. There can be no assurance that events having an adverse effect on the industries in which Olin (including DCP following the consummation of the Transactions) operates will not occur or continue, such as a downturn in the Western European, South American, Asian or world economies, increases in interest rates or unfavorable currency fluctuations. Economic conditions in other regions of the world, predominantly Asia and Europe, can increase the amount of caustic soda produced and available for export to North America. The increased caustic soda supply can put downward pressure on caustic soda prices charged by Olin, negatively impacting Olin’s profitability.

Cyclical Pricing Pressure—Olin’s profitability could be reduced by declines in average selling prices of Olin’s products, particularly declines in the electrochemical unit (“ECU”) netbacks for chlorine and caustic soda.

Olin’s historical operating results reflect the cyclical and sometimes volatile nature of the chemical and ammunition industries. Olin expects to continue to be subject to this cyclicality and volatility following the consummation of the Transactions. Olin experiences, and expects to continue to experience, cycles of fluctuating supply and demand in each of its business segments, particularly in chlor alkali products, which result in changes in selling prices. Periods of high demand, tight supply and increasing operating margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of oversupply and declining prices. Another factor influencing demand and pricing for chlorine and caustic soda is the price of natural gas. Higher natural gas prices increase the manufacturing costs of Olin’s customers and competitors, and depending on the ratio of crude oil to natural gas prices, could make them less competitive in world markets. Continued expansion offshore, particularly in Asia, will continue to have an impact on the ECU values as imported caustic soda replaces some capacity in North America.

In the chlor alkali industry, price is the major supplier selection criterion. Olin has little or no ability to influence prices in this large commodity market. Decreases in the average selling prices of Olin’s products could have a material adverse effect on Olin’s profitability. While Olin strives to maintain or increase its profitability

 

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by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expenses, there can be no assurance that these efforts will be sufficient to offset fully the effect of possible decreases in pricing on operating results.

Because of the cyclical nature of Olin’s businesses, there can be no assurance that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in Olin’s and DCP’s respective operating results or the pro forma operating results presented in this document. There can also be no assurance that the chlor alkali industry will not experience adverse trends in the future, or that Olin’s business, financial condition and results of operations will not be adversely affected by them.

Olin’s chemical distribution segment is also subject to changes in operating results as a result of cyclical pricing pressures. The prices at which Olin resells the products that it distributes often fluctuate in accordance with the prices that Olin pays for these products, which in turn are driven by the underlying commodity prices, such as caustic soda, in accordance with supply and demand economics. Olin attempts to pass commodity pricing changes through to its customers, but may be unable to do so or be delayed in doing so. The inability to pass through price increases or any limitation or delays in passing through price increases in Olin’s chemical distribution segment could adversely affect Olin’s profitability.

Olin’s Winchester segment is also subject to changes in operating results as a result of cyclical pricing pressures, but to a lesser extent than Olin’s chlor alkali products segment. Selling prices of ammunition are affected by changes in raw material costs and availability and customer demand, and declines in average selling prices of products of Olin’s Winchester segment could adversely affect Olin’s profitability.

Raw Materials—Availability of purchased feedstocks and energy, and the volatility of these costs, impact Olin’s operating costs and add variability to earnings.

Purchased feedstock and energy costs account, and will continue to account, for a substantial portion of Olin’s total production costs and operating expenses. Olin purchases, and will continue to purchase, certain raw materials as feedstocks. Olin also purchases, and will continue to purchase, natural gas and electric power.

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact Olin’s business, financial condition and results of operations.

If the availability of any of Olin’s principal feedstocks is limited or Olin is unable to obtain natural gas or energy from any of its energy sources, Olin may be unable to produce some of its products in the quantities demanded by its customers, which could have a material adverse effect on plant utilization and its sales of products requiring such raw materials. In connection with the Transactions, Olin and DCP will enter into long-term supply agreements with TDCC for certain raw materials, including ethylene, propylene and benzene. The initial term of the majority of these supply agreements is either five or ten years (a small number of agreements have shorter or longer initial terms) beginning on the date of the Distribution. As these contracts with TDCC and other third-party contracts expire, Olin may be unable to renew these contracts or obtain new long-term supply agreements on terms comparable or as favorable to Olin, depending on market conditions, which may have a material adverse effect on Olin’s business, financial condition and results of operations.

In addition, many of Olin’s and DCP’s long-term contracts contain provisions that allow their suppliers to limit the amount of raw materials shipped to Olin below the contracted amount in force majeure circumstances. If Olin is required to obtain alternate sources for raw materials because TDCC or any other supplier is unwilling or unable to perform under raw material supply agreements or if a supplier terminates its agreements with Olin, Olin may not be able to obtain these raw materials from alternative suppliers or obtain new long-term supply agreements on terms comparable or favorable to Olin.

 

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Suppliers—Olin relies and will continue to rely on a limited number of outside suppliers for specified feedstocks and services.

Olin obtains, and following the consummation of the Transactions, will continue to obtain, a significant portion of its raw materials from a few key suppliers. If any of these suppliers are unable to meet their obligations under present or any future supply agreements, Olin may be forced to pay higher prices to obtain the necessary raw materials. Any interruption of supply or any price increase of raw materials could have a material adverse effect on Olin’s business, financial condition and results of operations. Upon the consummation of the Transactions, Olin will enter into agreements with TDCC to provide specified feedstocks and services for the facilities operated by DCP. These facilities will be dependent upon TDCC’s infrastructure for services such as wastewater and ground water treatment. Any failure of TDCC to perform its obligations under those agreements could adversely affect the operation of the affected facilities and Olin’s business, financial condition and results of operations. Many of the agreements relating to these feedstocks and services have initial terms ranging from several years to 20 years. Most of these agreements are automatically renewable, but may be terminated by Olin or TDCC after specified notice periods. If Olin is required to obtain an alternate source for these feedstocks or services, Olin may not be able to obtain pricing on as favorable terms. Additionally, Olin may be forced to pay additional transportation costs or to invest in capital projects for pipelines or alternate facilities to accommodate railcar or other delivery methods or to replace other services.

A vendor may choose, subject to existing contracts, to modify its relationship due to general economic concerns or concerns relating to the vendor or Olin, at any time. Any significant change in the terms that Olin has with its key suppliers could materially adversely affect Olin’s business, financial condition and results of operation, as could significant additional requirements from its suppliers that Olin provide them additional security in the form of prepayments or posting letters of credit.

Imbalance in Demand for Olin’s Chlor Alkali Products—A loss of a substantial customer for Olin’s chlorine or caustic soda could cause an imbalance in customer demand for these products, which could have an adverse effect on Olin’s results of operations.

Chlorine and caustic soda are produced simultaneously and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda. The loss of a substantial chlorine or caustic soda customer could cause an imbalance in customer demand for Olin’s chlorine and caustic soda products. An imbalance in customer demand may require Olin to reduce production of both chlorine and caustic soda or take other steps to correct the imbalance. Since Olin cannot store large quantities of chlorine, Olin may not be able to respond to an imbalance in customer demand for these products as quickly or efficiently as some of Olin’s competitors. If a substantial imbalance occurred, Olin would need to reduce prices or take other actions that could have a material adverse impact on Olin’s business, results of operations and financial condition.

Security and Chemicals Transportation—Regulations on the transportation of hazardous chemicals and/or the security of chemical manufacturing facilities and public policy changes related to transportation safety could result in significantly higher operating costs.

The transportation of Olin’s products and feedstocks, including transportation by pipeline, and the security of Olin’s chemical manufacturing facilities are subject to extensive regulation. Government authorities at the local, state and federal levels could implement new or stricter regulations that would impact the security of chemical plant locations and the transportation of hazardous chemicals. Olin’s chlor alkali products business, including DCP, could be materially adversely impacted by the cost of complying with any new regulations. Olin’s business also could be adversely affected if an incident were to occur at one of Olin’s facilities or while transporting product. The extent of the impact would depend on the requirements of future regulations and the nature of an incident, which are unknown at this time.

Effects of Regulation—Changes in legislation or government regulations or policies could have a material adverse effect on Olin’s financial position or results of operations.

Legislation that may be passed by Congress or other legislative bodies or new regulations that may be issued by federal and other administrative agencies, including import and export duties and quotas, anti-dumping

 

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regulations and related tariffs, could significantly affect the sales, costs and profitability of Olin’s business. The chemical and ammunition industries are subject to legislative and regulatory actions, which could have a material adverse effect on Olin’s business, financial position or results of operations. Existing and future government regulations and laws may reduce the demand for Olin’s products, including certain chlorinated organic products, such as dry cleaning solvents, produced by DCP. Any decrease in the demand for chlorinated organic products could result in lower unit sales and lower selling prices for such chlorinated organic products, which would have a material adverse effect on Olin’s business, financial condition and results of operations.

Cost Control—Olin’s profitability could be reduced if Olin experiences increasing raw material, utility, transportation or logistics costs, or if Olin fails to achieve targeted cost reductions, including cost reductions expected to be realized following the consummation of the Transactions.

Olin’s operating results and profitability are, and will continue to be, dependent upon its continued ability to control, and in some cases reduce, its costs. In addition, Olin’s expected benefits from the Transactions are dependent upon Olin’s ability to reduce its costs following the consummation of the Transactions. If Olin is unable to do so, or if costs outside of Olin’s control, particularly Olin’s costs of raw materials, utilities, transportation and similar costs, increase beyond anticipated levels, Olin’s profitability will decline and Olin will not realize the level of cost reductions anticipated following the Transactions.

For example, Olin’s chlor alkali product transportation costs, particularly railroad shipment costs, are a significant portion of Olin’s cost of goods sold, and have been increasing over the past several years. Part of the anticipated cost reductions from the Transactions are due to transportation cost efficiencies from the increased number of manufacturing locations and the Dow Chlorine Product Business’s utilization of diverse modes of delivery for products which Olin currently delivers by rail. If transportation costs continue to increase, and Olin is unable to control those costs or pass the increased costs on to customers, Olin’s profitability in its chlor alkali business would be negatively affected. Similarly, costs of commodity metals and other materials used in Olin’s Winchester business, such as copper and lead, can vary. If Olin experiences significant increases in these costs and is unable to raise its prices to offset the higher costs, the profitability in Olin’s Winchester business would be negatively affected.

Environmental Costs—Olin has, and will continue to have, ongoing environmental costs, which could have a material adverse effect on Olin’s financial position or results of operations.

Olin’s operations and assets are, and after consummation of the Transactions will continue to be, subject to extensive environmental, health and safety regulations, including laws and regulations related to air emissions, water discharges, waste disposal and remediation of contaminated sites, at both the national and local levels in the United States. Olin is also subject to similar laws and regulations in other jurisdictions in which Olin operates or will operate after consummation of the Transactions. The nature of Olin’s operations and products, including the raw materials it handles, exposes Olin to the risk of liabilities, obligations or claims under these laws and regulations due to the production, storage, use, transportation and sale of materials that can cause contamination or personal injury, including, in the case of chemicals, potential releases into the environment. Environmental laws may have a significant effect on the costs of use, transportation and storage of raw materials and finished products, as well as the costs of the storage and disposal of wastes. In addition, Olin is party to various governmental and private environmental actions associated with past manufacturing facilities and former waste disposal sites. Olin has incurred, and expects to incur, significant costs and capital expenditures in complying with environmental laws and regulations.

The ultimate costs and timing of environmental liabilities are difficult to predict. Liabilities under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. One liable party could be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal. Olin could incur significant costs, including cleanup costs, natural resource damages, civil or criminal fines and sanctions and third-party lawsuits claiming, for example, personal injury and/or property damage, as a result of past or future violations of, or liabilities under, environmental or other laws.

 

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In addition, future events, such as changes to or more rigorous enforcement of environmental laws, could require Olin to make additional expenditures, modify or curtail its operations and/or install pollution control equipment. It is possible that regulatory agencies may enact new or more stringent clean-up standards for chemicals of concern, including chlorinated organic products manufactured by DCP. This could lead to expenditures for environmental remediation in the future that are additional to existing estimates.

Accordingly, it is possible that some of the matters in which Olin is involved or may become involved may be resolved unfavorably to Olin, which could materially adversely affect Olin’s business, financial position, cash flows or results of operations.

Litigation and Claims—Olin is subject to litigation and other claims, which could cause Olin to incur significant expenses.

Olin is a defendant in a number of pending legal proceedings relating to its present and former operations. These include product liability claims relating to ammunition and firearms and proceedings alleging injurious exposure of plaintiffs to various chemicals and other substances (including proceedings based on alleged exposures to asbestos). Frequently, the proceedings alleging injurious exposure involve claims made by numerous plaintiffs against many defendants. Olin’s exposure to potential losses from products liability, personal injury and other claims is expected to increase as a result of the Transactions due to the increased size of Olin’s business and product portfolio. Because of the inherent uncertainties of litigation, Olin is unable to predict the outcome of these proceedings and therefore cannot determine whether the financial impact, if any, will be material to Olin’s financial position, cash flows or results of operations.

Integration of Information Technology Systems—Operation on multiple Enterprise Resource Planning (“ERP”) information systems, and the conversion from multiple systems to a single system, may negatively impact Olin’s operations.

Olin is, and after consummation of the Transactions will continue to be, highly dependent on its information systems infrastructure in order to process orders, track inventory, ship products in a timely manner, prepare invoices to its customers, maintain regulatory compliance and otherwise carry on its business in the ordinary course. Olin currently operates on an ERP information system. In addition, DCP currently operates on a separate ERP system. Since Olin will be required to process and reconcile its information from multiple systems, after the consummation of the Transactions, the chance of errors will be increased, and Olin may incur significant additional costs related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact Olin’s ability to manage its business efficiently and may result in heightened risk to its ability to maintain its books and records and comply with regulatory requirements. Following the consummation of the Transactions, Olin expects that it may transition all or a portion of the operations of DCP from one ERP system to another. The transition to a different ERP system involves numerous risks, including:

 

    diversion of management’s attention away from normal daily business operations;

 

    loss of, or delays in accessing, data;

 

    increased demand on its operations support personnel;

 

    increased costs;

 

    initial dependence on unfamiliar systems while training personnel to use new systems; and

 

    increased operating expenses resulting from training, conversion and transition support activities.

Any of the foregoing could result in a material increase in information technology compliance or other related costs, and could materially and negatively impact Olin’s business, results of operations or financial condition.

 

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Information Security—A failure of Olin’s information technology systems, or an interruption in their operation, could have a material adverse effect on Olin’s business, financial condition or results of operations.

Olin’s operations are, and after consummation of the Transactions will continue to be, dependent on its ability to protect its information systems, computer equipment and information databases from systems failures. Olin relies on its information technology systems generally to manage the day-to-day operation of Olin’s business, operate elements of its chlor alkali and ammunition manufacturing facilities, manage relationships with its customers, fulfill customer orders and maintain its financial and accounting records. Failures of Olin’s information technology systems could be caused by internal or external events, such as incursions by intruders or hackers, computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication fluctuations or failures. The failure of Olin’s information technology systems to perform as anticipated for any reason or any significant breach of security could disrupt its business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, increased costs or loss of important information, any of which could have a material adverse effect on Olin’s business, financial condition or results of operations. Olin has technology and information security processes and disaster recovery plans in place to mitigate its risk to these vulnerabilities. However, these measures may not be adequate to ensure that Olin’s operations will not be disrupted should such an event occur.

Production Hazards—Olin’s facilities are subject to operating hazards, which may disrupt Olin’s business.

Olin is, and after consummation of the Transactions will continue to be, dependent upon the continued safe operation of its production facilities. Olin’s production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products and ammunition, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unexpected utility disruptions or outages, unscheduled downtime, transportation interruptions, transportation accidents involving its chemical products, chemical spills and other discharges or releases of toxic or hazardous substances or gases and environmental hazards. From time to time in the past, Olin has had incidents that have temporarily shut down or otherwise disrupted its manufacturing, causing production delays and resulting in liability for workplace injuries and fatalities. Some of Olin’s products involve the manufacture and/or handling of a variety of explosive and flammable materials. Use of these products by Olin’s customers could also result in liability if an explosion, fire, spill or other accident were to occur. Olin cannot assure you that it will not experience these types of incidents in the future or that these incidents will not result in production delays or otherwise have a material adverse effect on Olin’s business, results of operations or financial condition. In the past, major hurricanes have caused significant disruption in DCP’s operations on the U.S. Gulf Coast, logistics across the region and the supply of certain raw materials, which had an adverse impact on volume and cost for some of DCP’s products. Due to the substantial presence of Olin and DCP on the U.S. Gulf Coast, historically and after the consummation of the Transactions, similar severe weather conditions or other natural phenomena in the future could negatively affect Olin’s results of operations.

Third Party Transportation—Olin relies, and will continue to rely, heavily on third party transportation, which subjects it to risks and costs that Olin cannot control, and which risks and costs may have a material adverse effect on Olin’s financial position or results of operations.

Olin will rely heavily on railroad, barge and other shipping companies to transport finished products to customers and to transport raw materials to the manufacturing facilities used by each of Olin’s businesses. These transport operations are subject to various hazards and risks, including extreme weather conditions, work stoppages and operating hazards, as well as interstate transportation regulations. In addition, the methods of transportation Olin utilizes and will utilize after the consummation of the Transactions, including shipping chlorine and other chemicals by railroad and by barge, may be subject to additional, more stringent and more costly regulations in the future. If Olin is delayed or unable to ship finished products or unable to obtain raw materials as a result of any such new regulations or public policy changes related to transportation safety, or these transportation companies’ failure to operate properly, or if there were significant changes in the cost of these services due to new additional regulations, or otherwise, Olin may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on Olin’s business, financial position or results of operations.

 

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Ability to Attract and Retain Qualified Employees—Olin must attract, retain and motivate key employees, and the failure to do so may adversely affect Olin’s business, financial condition or results of operations.

Olin feels that its success depends on hiring, retaining and motivating key employees, including executive officers. Olin may have difficulty locating and hiring qualified personnel. In addition, Olin may have difficulty retaining such personnel once hired, and key people may leave and compete against Olin. The loss of key personnel or Olin’s failure to attract and retain other qualified and experienced personnel could disrupt or materially adversely affect Olin’s business, financial condition or results of operations. In addition, our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover, which may result in loss of significant customer business, or increased costs.

Indebtedness—Olin will have a substantial amount of indebtedness following the Transactions, which could materially adversely affect its financial condition.

Olin has a significant amount of indebtedness and its leverage will increase as a result of the Transactions. As of June 30, 2015, Olin had $672 million of indebtedness outstanding, and as of June 30, 2015 on a pro forma basis after giving effect to the Transactions, Olin would have had outstanding indebtedness of $3,917 million. Outstanding indebtedness does not include amounts that could be borrowed under Olin’s $265 million senior revolving credit facility, under which $259 million was available for borrowing as of June 30, 2015 because Olin had issued $6 million of letters of credit. In connection with the Transactions, Olin has entered into the Olin Credit Agreement, which will replace Olin’s existing senior revolving credit facility with a new $500 million senior revolving credit facility. Despite its level of indebtedness, Olin has and expects to continue to have the ability to borrow additional debt.

After the consummation of the Transactions, Olin’s indebtedness could have important consequences, including but not limited to:

 

    limiting its ability to fund working capital, capital expenditures and other general corporate purposes;

 

    limiting its ability to accommodate growth by reducing funds otherwise available for other corporate purposes and to compete, which in turn could prevent Olin from fulfilling its obligations under its indebtedness;

 

    limiting its operational flexibility due to the covenants contained in its debt agreements;

 

    requiring it to dispose of significant assets in order to satisfy its debt service and other obligations if it is not able to satisfy these obligations from cash from operations or other sources;

 

    to the extent that Olin’s debt is subject to floating interest rates, increasing Olin’s vulnerability to fluctuations in market interest rates;

 

    limiting Olin’s ability to buy back Olin common stock or pay cash dividends;

 

    limiting its flexibility in planning for, or reacting to, changes in its business or industry or economic conditions, thereby limiting its ability to compete with companies that are not as highly leveraged; and

 

    increasing its vulnerability to economic downturns.

Olin’s ability to generate sufficient cash flow from operations to make scheduled payments on Olin’s debt will depend on a range of economic, competitive and business factors, many of which are outside its control. There can be no assurance that Olin’s business will generate sufficient cash flow from operations to make these payments. If Olin is unable to meet its expenses and debt obligations, Olin may need to refinance all or a portion of its indebtedness before maturity, sell assets or issue additional equity. Olin may not be able to refinance any of its indebtedness, sell assets or issue additional equity on commercially reasonable terms or at all, which could cause Olin to default on its obligations and impair its liquidity. Olin’s inability to generate sufficient cash flow to satisfy its debt obligations, or to refinance its debt obligations on commercially reasonable terms, would have a material adverse effect on Olin’s business, financial condition and results of operations, as well as on Olin’s ability to satisfy its debt obligations.

 

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Credit Facilities—Weak industry conditions could affect Olin’s ability to comply with the financial maintenance covenants in Olin’s senior credit facility and certain tax-exempt bonds.

Olin’s senior credit facility and Olin’s Gulf Opportunity Zone Act of 2005 (Go Zone) and American Recovery and Reinvestment Act of 2009 (Recovery Zone) tax-exempt bonds include certain financial maintenance covenants requiring Olin to not exceed a maximum leverage ratio and to maintain a minimum coverage ratio. In addition, Olin expects that the financing agreements to be entered into in connection with the Transactions and described in the section of this document entitled “Debt Financing” may contain similar restrictions.

Depending on the magnitude and duration of chlor alkali cyclical downturns, including deterioration in prices and volumes, there can be no assurance that Olin will continue to be in compliance with these ratios. If Olin failed to comply with either of these covenants in a future period and was not able to obtain waivers from the lenders thereunder, Olin would need to refinance its current senior credit facility and the Go Zone and Recovery Zone bonds, or, following the consummation of the Transactions, the New Credit Facilities and the Sumitomo Term Facility. However, there can be no assurance that such refinancing would be available to Olin on terms that would be acceptable to it or at all.

Credit and Capital Market Conditions—Adverse conditions in the credit and capital markets may limit or prevent Olin’s ability to borrow or raise capital.

While Olin believes it has and will continue to have facilities in place that should allow Olin to borrow funds as needed to meet its ordinary course business activities, adverse conditions in the credit and financial markets could prevent Olin from obtaining financing, if the need arises. Olin’s ability to invest in its businesses and refinance or repay maturing debt obligations could require access to the credit and capital markets and sufficient bank credit lines to support cash requirements. If Olin is unable to access the credit and capital markets on commercially reasonable terms, Olin could experience a material adverse effect on its business, financial position or results of operations.

Pension Plans—The impact of declines in global equity and fixed income markets on asset values and any declines in interest rates and/or improvements in mortality assumptions used to value the liabilities in Olin’s pension plans may result in higher pension costs and the need to fund Olin’s existing pension plans in future years in material amounts.

Under Accounting Standard Codification (ASC) 715 “Compensation-Retirement Benefits” (ASC 715), Olin recorded an after-tax charge of $87 million ($142 million pretax) to shareholders’ equity as of December 31, 2014 for its pension and other postretirement plans. This charge reflected a 60-basis point decrease in the plans’ discount rate and the negative impact of the newly mandated mortality tables, partially offset by favorable performance on plan assets during 2014. In 2013, Olin recorded an after-tax charge of $8 million ($13 million pretax) to shareholders’ equity as of December 31, 2013 for its pension and other postretirement plans. This charge reflected unfavorable performance on plan assets during 2013, partially offset by a 60-basis point increase in the plans’ discount rate. In 2012, Olin recorded an after-tax charge of $102 million ($167 million pretax) to shareholders’ equity as of December 31, 2012 for its pension and other postretirement plans. This charge reflected a 100-basis point decrease in the plans’ discount rate, partially offset by the favorable performance on plan assets during 2012. These non-cash charges to shareholders’ equity do not affect Olin’s ability to borrow under its senior credit facility.

The determinations of pension expense and pension funding are based on a variety of rules and regulations. Changes in these rules and regulations could impact the calculation of pension plan liabilities and the valuation of pension plan assets. They may also result in higher pension costs and additional financial statement disclosure, and accelerate the need to fully fund the pension plan. During the fourth quarter of 2014, the Society of Actuaries (SOA) issued the final report of its mortality tables and mortality improvement scales. The updated mortality data reflected increasing life expectancies in the United States. During the third quarter of 2012, the “Moving Ahead for Progress in the 21st Century Act” (MAP-21) became law. The new law changes the mechanism for

 

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determining interest rates to be used for calculating minimum defined benefit pension plan funding requirements. Interest rates are determined using an average of rates for a 25-year period, which can have the effect of increasing the annual discount rate, reducing the defined benefit pension plan obligation and potentially reducing or eliminating the minimum annual funding requirement. The new law also increased premiums paid to the Pension Benefit Guaranty Corporation (PBGC). During the third quarter of 2014, the “Highway and Transportation Funding Act” (HATFA 2014) became law, which includes an extension of MAP-21’s defined benefit plan funding stabilization relief. Based on Olin’s plan assumptions and estimates, Olin will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2015 and under the new law may not be required to make any additional contributions for at least the next five years. Olin does have a small Canadian qualified defined benefit pension plan to which Olin made cash contributions of $1 million in 2014, $1 million in 2013 and $1 million in 2012, and Olin anticipates approximately $1 million of cash contributions in 2015. At December 31, 2014, the projected benefit obligation of $2,117 million exceeded the market value of assets in Olin’s qualified defined benefit pension plans by $139 million, as calculated under ASC 715.

In addition, the impact of declines in global equity and fixed income markets on asset values may result in higher pension costs and may increase and accelerate the need to fund the pension plans in future years. For example, holding all other assumptions constant, a 100-basis point decrease or increase in the assumed long-term rate of return on plan assets would have decreased or increased, respectively, the 2014 defined benefit pension plans income by approximately $17 million.

Holding all other assumptions constant, a 50-basis point decrease in the discount rate used to calculate pension income for 2014 and the projected benefit obligation as of December 31, 2014 would have decreased pension income by $1 million and increased the projected benefit obligation by $118 million. A 50-basis point increase in the discount rate used to calculate pension income for 2014 and the projected benefit obligation as of December 31, 2014 would have increased pension income by $1 million and decreased the projected benefit obligation by $115 million.

Olin will assume certain material pension benefit obligations associated with DCP. These liabilities and the related future funding obligations could restrict cash available for Olin operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity.

In the Transactions, Olin’s U.S. tax-qualified defined benefit pension plan will, in accordance with TDCC’s election, assume certain U.S. tax-qualified defined benefit pension obligations related to active employees and certain terminated, vested retirees of DCP with a net liability of approximately $273 million, which amount remains subject to adjustment, and will be finally determined as of the closing date of the merger. In connection therewith, pension assets may be transferred from TDCC’s U.S. tax-qualified defined benefit pension plans to an existing U.S. tax-qualified defined benefit pension plan maintained by Olin. In addition to the standard minimum funding requirements, the Pension Protection Act of 2006 (as amended by the Worker, Retiree and Employer Recovery Act of 2008) (the “Pension Act”) requires companies with U.S. tax-qualified defined benefit pension plans to make contributions to such plans as frequently as quarterly in order to meet the “funding target” for such plans, as defined in the Pension Act. The failure to meet a minimum required percentage of the funding target in any given year could result in adverse consequences, including the imposition of fines or penalties. Funding obligations with respect to U.S. tax-qualified defined benefit pension plans change due to, among other things, the actual investment return on plan assets and changes in interest rates and/or mortality assumptions. Continued volatility in the capital markets may have a further negative impact on the funded status of U.S. tax-qualified defined benefit pension plans, which may in turn increase attendant funding obligations. Given the amount of pension assets that may be transferred from TDCC’s U.S. tax-qualified defined benefit pension plans to Olin’s U.S. tax-qualified defined benefit pension plan, and subject to the foregoing and other variables, and the uncertainties associated therewith, it is possible that Olin could be required to make substantial additional contributions in future years to Olin’s tax-qualified defined benefit pension plan attributable to the transferred pension liabilities that eventually transfer. These contributions could restrict available cash for Olin’s operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity.

 

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In addition, in the Transactions, Olin will assume certain accrued defined benefit pension liabilities relating to employees of TDCC in Germany and Switzerland who transfer to Olin in connection with the Transactions. These liabilities and the related future payment obligations could restrict cash available for Olin operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity.

Labor Matters—Olin may not be able to conclude future labor contracts or any other labor agreements without work stoppages.

Various labor unions represent, and after consummation of the Transactions will continue to represent, a majority of Olin’s hourly paid employees for collective bargaining purposes.

While Olin believes its relations with its employees and their various representatives are generally satisfactory, Olin cannot assure that it can conclude any labor agreements without work stoppages and cannot assure that any work stoppages will not have a material adverse effect on Olin’s business, financial condition or results of operations.

Foreign Exchange Rates—Fluctuations in foreign currency exchange could affect Olin’s consolidated financial results.

Olin currently earns revenues, pays expenses, owns assets and incurs liabilities in countries using currencies other than the U.S. dollar. Following the consummation of the Transactions, Olin expects the percentage of its revenues earned, expenses paid, assets owned and liabilities incurred in currencies other than the U.S. dollar to significantly increase. Because Olin’s consolidated financial statements are presented in U.S. dollars, it must translate revenues and expenses into U.S. dollars at the average exchange rate during each reporting period, as well as assets and liabilities into U.S. dollars at exchange rates in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect Olin’s net revenues, operating income and the value of balance sheet items denominated in foreign currencies. Because of the geographic diversity of Olin’s operations, including, after the consummation of the Transactions, DCP, weaknesses in various currencies might occur in one or many of such currencies over time. From time to time, Olin may use derivative financial instruments to further reduce its net exposure to currency exchange rate fluctuations. However, Olin cannot assure you that fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, would not materially adversely affect its financial results.

 

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This document contains and incorporates by reference certain statements relating to future events and each of TDCC’s, Splitco’s and Olin’s intentions, beliefs, expectations, and predictions for the future. Any such statements other than statements of historical fact are forward-looking statements. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast,” “would” or “could” (including the negative variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events, including with respect to the Transactions, generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding expected benefits of the Transactions, integration plans and expected synergies therefrom, the expected timing of the consummation of the Transactions, and each of TDCC’s, Splitco’s and Olin’s anticipated future financial and operating performance and results, including its estimates for growth. These statements are based on the current expectations of management of each of TDCC, Splitco and Olin. There are a number of risks and uncertainties that could cause each company’s actual results to differ materially from the forward-looking statements included or incorporated by reference in this document. These risks and uncertainties include, but are not limited to, risks relating to:

 

    Olin’s ability to obtain requisite shareholder approval to complete the Transactions;

 

    TDCC’s being unable to obtain the necessary tax authority and other regulatory approvals required to complete the Transactions, or such required approvals delaying the Transactions or resulting in the imposition of conditions that could have a material adverse effect on the combined company or causing the companies to abandon the Transactions;

 

    other conditions to the closing of the Transactions not being satisfied;

 

    a material adverse change, event or occurrence affecting Olin or DCP prior to the closing of the Transactions delaying the Transactions or causing the companies to abandon the Transactions;

 

    problems arising in successfully integrating DCP and Olin, which may result in the combined company not operating as effectively and efficiently as expected;

 

    Olin’s ability to achieve the synergies expected to result from the Transactions in the estimated amounts and within the anticipated time frame, if at all;

 

    the possibility that the Transactions may involve other unexpected costs, liabilities or delays;

 

    the businesses of each respective company being negatively impacted as a result of uncertainty surrounding the Transactions;

 

    disruptions from the Transactions harming relationships with customers, employees or suppliers; and

 

    uncertainties regarding:

 

    future prices;

 

    industry capacity levels and demand for each company’s products;

 

    raw materials and energy costs and availability, feedstock availability and prices;

 

    changes in governmental regulations or the adoption of new laws or regulations that may make it more difficult or expensive to operate each company’s businesses or manufacture its products before or after the Transactions;

 

    each company’s ability to generate sufficient cash flows from its businesses before and after the Transactions;

 

    future economic conditions in the specific industries to which its respective products are sold; and

 

    global economic conditions.

 

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In light of these risks, uncertainties, assumptions and other factors, the forward-looking statements discussed or incorporated by reference in this document may not occur. Other unknown or unpredictable factors could also have a material adverse effect on each of TDCC’s, Splitco’s and Olin’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties, see the section of this document entitled “Risk Factors.” As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. None of TDCC, Splitco or Olin undertakes, and each expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events, or changes in its respective expectations, except as required by law.

 

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THIS EXCHANGE OFFER

Terms of this Exchange Offer

General

TDCC is offering to exchange all issued and outstanding shares of Splitco common stock for shares of TDCC common stock, at an exchange ratio to be calculated in the manner described below, on the terms and conditions and subject to the limitations described below and in the letter of transmittal (including the instructions thereto) filed as an exhibit to the registration statement of which this document forms a part, tendered by 8:00 a.m., New York City time, on October 1, 2015, unless this exchange offer is extended or terminated. The last day on which tenders will be accepted, whether on October 1, 2015 or any later date to which this exchange offer is extended, is referred to in this document as the “expiration date.” You may tender all, some or none of your shares of TDCC common stock.

100,000,000 shares of Splitco common stock will be issued and outstanding and held by TDCC immediately prior to the Distribution. The number of shares of TDCC common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio and the number of shares of TDCC common stock tendered.

TDCC’s obligation to complete this exchange offer is subject to important conditions that are described in the section entitled “—Conditions for the Consummation of this Exchange Offer.”

For each share of TDCC common stock that you validly tender in this exchange offer and do not properly withdraw and that is accepted, you will receive a number of shares of Splitco common stock corresponding to a 10 percent discount to the per-share value of the shares of Olin common stock to be received in the Merger, calculated as set forth below, subject to an upper limit 2.9318 of shares of Splitco common stock per share of TDCC common stock. Stated another way, subject to the upper limit described below, for each $1.00 of TDCC common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock, which will, upon the effectiveness of the Merger, be converted into the right to receive approximately $1.11 of Olin common stock (less any cash amounts paid in lieu of fractional shares) calculated on the basis described herein. See “—Fractional Shares” and “—Exchange of Shares of TDCC Common Stock.”

The final calculated per-share values will be equal to:

(i) with respect to TDCC common stock, the simple arithmetic average of the daily VWAP of TDCC common stock on the NYSE for each of the Valuation Dates, as reported to TDCC by Bloomberg Finance L.P. displayed under the heading Bloomberg VWAP on the Bloomberg page “DOW UN <Equity> VAP” (or its equivalent successor page if such page is not available);

(ii) with respect to Olin common stock, the simple arithmetic average of the daily VWAP of Olin common stock for each of the Valuation Dates, as reported to TDCC by Bloomberg Finance L.P. displayed under the heading Bloomberg VWAP on the Bloomberg page “OLN UN <Equity> VAP” (or its equivalent successor page if such page is not available); and

(iii) with respect to Splitco common stock, the calculated per share value, determined as provided above, of Olin common stock, multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger).

The daily VWAP provided by Bloomberg Finance L.P. may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices. TDCC will determine such calculations of the per-share values of TDCC common stock and Splitco common stock, and such determination will be final.

 

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If the upper limit on the number of shares of Splitco common stock that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date. See “—Extension; Termination; Amendment—Mandatory Extension.”

Upper Limit

The number of shares you can receive is subject to an upper limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock accepted in this exchange offer. If the upper limit is in effect, a shareholder will receive less than $1.11 of Splitco common stock for each $1.00 of TDCC common stock that the shareholder validly tenders, that is not properly withdrawn and that is accepted in the exchange offer, and the shareholder could receive much less. This limit was calculated based on a 15 percent discount for shares of Splitco common stock based on the average of the daily VWAPs of TDCC common stock and Olin common stock on August 28, 2015, August 31, 2015, and September 1, 2015 (the last three trading days before the commencement of this exchange offer). The averages of the daily VWAPs of TDCC common stock and Olin common stock on August 28, 2015, August 31, 2015, and September 1, 2015 were $43.1746 and $19.8043, respectively. The upper limit was determined by dividing 100% of the calculated per-share value of TDCC common stock for such dates by 85% of the calculated per-share value of Splitco common stock for such dates (in each case determined in the manner described under “—General” above). TDCC set this upper limit to ensure that an unusual or unexpected drop in the trading price of Olin common stock, relative to the trading price of TDCC common stock, would not result in an unduly high number of shares of Splitco common stock being exchanged for each share of TDCC common stock accepted in this exchange offer, preventing a situation that might significantly reduce the benefits of the exchange offer to TDCC and its continuing shareholders due to a smaller number of outstanding shares being acquired by TDCC in this exchange offer. TDCC has a share buyback program designed to return capital to shareholders, reduce average share count and increase earnings per share. The split-off structure allows TDCC to reduce share count and increase earnings per share using Splitco common stock in the exchange offer instead of cash, and the upper limit is designed to set a minimum level of shares that will be repurchased by TDCC.

Pricing Mechanism

The terms of this exchange offer are designed to result in your receiving $1.11 of Splitco common stock for each $1.00 of TDCC common stock validly tendered, not properly withdrawn and accepted in this exchange offer, based on the calculated per-share values described above. This exchange offer does not provide for a lower limit or minimum exchange ratio because a minimum exchange ratio could result in the shares of Splitco common stock exchanged for each $1.00 of TDCC common stock being valued higher than approximately $1.11. Regardless of the final exchange ratio, the terms of this exchange offer would always result in your receiving approximately $1.11 of Splitco common stock for each $1.00 of TDCC common stock so long as the upper limit is not in effect. See the table on page 69 for purposes of illustration.

Subject to the upper limit described above, for each $1.00 of TDCC common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The following formula will be used to calculate the number of shares of Splitco common stock you will receive in exchange for each share of TDCC common stock accepted in this exchange offer:

 

Number of

shares of

Splitco

common

stock

   =    The lesser of    (a)   

2.9318

   and    (b)    100% of the calculated per-share value of TDCC common stock divided by 90% of the calculated per-share value of Splitco common stock (calculated as described below)

 

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The calculated per-share value of a share of TDCC common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of TDCC common stock on the NYSE on each of the Valuation Dates. The calculated per-share value of a share of Splitco common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Olin common stock on the NYSE on each of the Valuation Dates multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger).

If the upper limit is in effect, the exchange ratio will be fixed and the calculated per-share values of TDCC common stock and Splitco common stock based on the daily VWAP of TDCC common stock and Olin common stock during the Mandatory Extension will no longer affect the exchange ratio, which will be fixed at 2.9318. See “—Extension; Termination; Amendment—Mandatory Extension.” To help illustrate the way this calculation works, below are two examples:

Example 1: Assuming that the average of the daily VWAP on the Valuation Dates is $43.0000 per share of TDCC common stock and $21.0000 per share of Olin common stock, you would receive 2.6007 shares ($43.0000 divided by 90 percent of the product of $21.0000 and 0.87482759) of Splitco common stock for each share of TDCC common stock accepted in this exchange offer, which will be converted into the right to receive 2.2751 shares of Olin common stock at the effectiveness of the Merger (subject to payment of cash in lieu of fractional shares). In this example, the upper limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock would not apply.

Example 2: Assuming that the average of the daily VWAP on the Valuation Dates is $45.0000 per share of TDCC common stock and $19.0000 per share of Olin common stock, the upper limit would apply and you would only receive 2.9318 shares of Splitco common stock for each share of TDCC common stock accepted in this exchange offer because the upper limit is less than 3.0081 shares ($45.0000 divided by 90 percent of the product of $19.0000 and 0.87482759) of Splitco common stock for each share of TDCC common stock, which will be converted into the right to receive 2.5648 shares of Olin common stock at the effectiveness of the Merger (subject to payment of cash in lieu of fractional shares). Because the upper limit would apply, this exchange offer would be automatically extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date, and the exchange ratio would be fixed at the upper limit.

If the upper limit is in effect, under extreme circumstances, it is possible that you could receive less than $1.00 of Splitco common stock for each $1.00 of TDCC common stock accepted for exchange.

Indicative Per-Share Values

You will be able to review indicative exchange ratios and calculated per-share values of TDCC common stock, Splitco common stock, Olin common stock and the final exchange ratio used to determine the number of shares of Splitco common stock to be exchanged per share of TDCC common stock. TDCC will maintain a website at www.edocumentview.com/dowexchange that provides indicative exchange ratios and calculated per-share values of TDCC common stock, Splitco common stock and Olin common stock. The indicative exchange ratios will reflect whether the upper limit on the exchange ratio, described above, would have been in effect. You may also contact the information agent at the toll-free number provided on the back cover of this document to obtain these indicative exchange ratios.

From the second trading day after the commencement of this exchange offer until the first Valuation Date, the website will show the indicative calculated per-share values on a given day, calculated as though that day were the third Valuation Date of this exchange offer, of (i) TDCC common stock, which will equal the simple arithmetic average of the daily VWAP of TDCC common stock, as calculated by TDCC, on each of the three consecutive trading days ending on and including such day, (ii) Splitco common stock, which will equal the simple arithmetic average of the daily VWAP of Olin common stock, as calculated by TDCC, multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger) on each of the three consecutive trading days ending on and including such day and (iii) Olin common stock, which will equal the simple arithmetic average of the daily VWAP of Olin common stock, as calculated by TDCC, on each of the three consecutive trading days ending on and including such day.

 

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On each of the Valuation Dates, when the values of TDCC common stock, Splitco common stock and Olin common stock are calculated for the purposes of this exchange offer, the website will show the indicative calculated per-share values of TDCC common stock, Splitco common stock and Olin common stock, as calculated by TDCC, which will equal, with respect to each stock, (i) on the first Valuation Date, the intra-day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date. “Intra-day VWAP” means VWAP for the period beginning at the official open of trading on the NYSE and ending as of the specific time in such day. On each of the Valuation Dates, the indicative calculated per-share values and indicative exchange ratio calculated using such values will be updated at 10:30 a.m., 1:30 p.m. and by 4:30 p.m., New York City time.

Final Exchange Ratio

The final exchange ratio that shows the number of shares of Splitco common stock that you will receive for each share of TDCC common stock accepted in this exchange offer will be available at www.edocumentview.com/dowexchange and announced by press release by 4:30 p.m., New York City time, on September 30, 2015, unless this exchange offer is extended or terminated.

You may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll-free number provided on the back cover of this document.

Each of the daily VWAPs, intra-day VWAPs, calculated per-share values and the final exchange ratio will be rounded to four decimal places.

If a market disruption event occurs with respect to TDCC common stock or Olin common stock on any of the Valuation Dates, the calculated per-share value of TDCC common stock and Splitco common stock will be determined using the daily VWAP of TDCC common stock and Olin common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to both TDCC common stock and Olin common stock. If, however, a market disruption event occurs as specified above, TDCC may terminate this exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of this exchange offer. For specific information as to what would constitute a market disruption event, see “—Conditions for the Consummation of this Exchange Offer.”

Since this exchange offer is scheduled to expire at 8:00 a.m., New York City time, on the last day of the exchange offer period, and the final exchange ratio will be announced by 4:30 p.m., New York City time, on the last trading day prior to the expiration date of this exchange offer, you will be able to tender or withdraw your shares of TDCC common stock after the final exchange ratio is determined. For more information on validly tendering and properly withdrawing your shares, see “—Procedures for Tendering” and “—Withdrawal Rights.”

For the purposes of illustration, the table below indicates the number of shares of Splitco common stock that you would receive per share of TDCC common stock accepted in this exchange offer, calculated on the basis described above and taking into account the upper limit described above, assuming a range of averages of the daily VWAP of TDCC common stock and Olin common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share values of TDCC common stock and Splitco common stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on September 1, 2015, based on the daily VWAPs of TDCC common stock and Olin common stock on

 

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August 28, 2015, August 30, 2015, and September 1, 2015. The table also shows the effects of a 5 percent increase or decrease in either or both of the calculated per-share values of TDCC common stock and Olin common stock based on changes relative to the values as of September 1, 2015.

 

TDCC common stock

 

Olin common stock

  Calculated
per-share
value of
TDCC
common
stock
    Calculated
per-share
value of
Olin
common
stock
    Calculated
per-share
value of
Splitco
common
stock (1)
    Shares of Splitco
common stock
to be received
per share of
TDCC common
stock tendered
    Shares of Olin
common
stock to be
received per
share of
TDCC
common
stock (2)
    Calculated
Value
Ratio (3)
 

As of September 1, 2015

 

As of September 1, 2015

    43.1746        19.8043        17.3253        2.7689        2.4223        1.1111   

Down 5%

 

Up 5%

    41.0159        20.7945        18.1916        2.5052        2.1916        1.1111   

Down 5%

 

Unchanged

    41.0159        19.8043        17.3253        2.6304        2.3011        1.1111   

Down 5%

 

Down 5%

    41.0159        18.8141        16.4591        2.7689        2.4223        1.1111   

Unchanged

 

Up 5%

    43.1746        20.7945        18.1916        2.6370        2.3069        1.1111   

Unchanged

 

Down 5%

    43.1746        18.8141        16.4591        2.9146        2.5498        1.1111   

Up 5%

 

Up 5%

    45.3333        20.7945        18.1916        2.7689        2.4223        1.1111   

Up 5%

 

Unchanged

    45.3333        19.8043        17.3253        2.9073        2.5434        1.1111   

Up 5%

 

Down 5%

    45.3333        18.8141        16.4591        2.9318  (4)      2.5648        1.0644   

 

(1) The calculated per-share value of Splitco common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Olin common stock on the NYSE on each of the Valuation Dates, multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger).
(2) Subject to receipt of cash in lieu of fractional shares of Olin common stock. See “—Fractional Shares.”
(3) The Calculated Value Ratio equals (i) the calculated per-share value of Splitco common stock multiplied by the exchange offer exchange ratio, divided by (ii) the calculated per-share value of TDCC common stock.
(4) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 3.0603 shares per share of TDCC common stock validly tendered and accepted in this exchange offer. In this scenario, TDCC would announce that the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date, that the exchange ratio would be fixed at the upper limit and this exchange offer would be extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date.

During the three-month period of June 1, 2015 through September 1, 2015, the highest closing price of TDCC common stock on the NYSE was $53.59 and the lowest closing price of Olin common stock on the NYSE was $18.77. If the calculated per-share values of TDCC common stock and Splitco common stock were calculated based on these closing prices, you would receive only the limit of 2.9318 shares of Splitco common stock for each share of TDCC common stock tendered, and the value of such shares of Splitco common stock, based on the Olin common stock price multiplied by 0.87482759 (which is the number of shares of Olin common stock to be received for each share of Splitco common stock in the Merger), would have been approximately $0.90 of Splitco common stock for each $1.00 of TDCC common stock accepted for exchange.

If the trading price of TDCC common stock were to increase during the period of the Valuation Dates, the average TDCC stock price used to calculate the exchange ratio would likely be lower than the closing price of TDCC common stock on the expiration date of this exchange offer. As a result, you may receive fewer shares of Splitco common stock, and therefore effectively fewer shares of Olin common stock, for each $1.00 of shares of TDCC common stock than you would have if the average TDCC stock price were calculated on the basis of the closing price of shares of TDCC common stock on the expiration date of this exchange offer or on the basis of an averaging period that includes the Valuation Dates. Similarly, if the trading price of Olin common stock were to decrease during the Valuation Dates, the average Olin stock price used to calculate the exchange ratio would likely be higher than the closing price of Olin common stock on the expiration date. This could also result in your receiving fewer shares of Splitco common stock, and therefore effectively fewer shares of Olin common stock, for each $1.00 of TDCC common stock than you would otherwise receive if the average Olin common stock price were calculated on the basis of the closing price of Olin common stock on the expiration date or on the basis of an averaging period that included the Valuation Dates.

 

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The number of shares of TDCC common stock that may be accepted in this exchange offer may be subject to proration. Depending on the number of shares of TDCC common stock validly tendered, and not properly withdrawn in this exchange offer, and the final exchange ratio, determined as described above, TDCC may have to limit the number of shares of TDCC common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described below under “—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock.”

This document and related documents are being sent to persons who directly held shares of TDCC common stock on September 1, 2015 and brokers, banks and similar persons whose names or the names of whose nominees appear on TDCC’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of TDCC common stock.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock

If, upon the expiration of this exchange offer, TDCC shareholders have validly tendered and not properly withdrawn more shares of TDCC common stock than TDCC is able to accept for exchange (taking into account the exchange ratio and the total number of shares of Splitco common stock owned by TDCC), TDCC will accept for exchange the TDCC common stock validly tendered and not properly withdrawn by each tendering shareholder on a pro rata basis, based on the proportion that the total number of shares of TDCC common stock to be accepted bears to the total number of shares of TDCC common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of TDCC common stock), and subject to any adjustment necessary to ensure the exchange of all shares of Splitco common stock owned by TDCC, except for tenders of odd-lots, as described below.

Beneficial holders of “odd-lots,” that is, fewer than 100 shares of TDCC common stock, who validly tender all of their shares and request preferential treatment will not be subject to proration if this exchange offer is oversubscribed. Beneficial holders of 100 or more shares of TDCC common stock are not eligible for the foregoing “odd-lots” preference. The “odd-lots” preference also does not apply to shares of TDCC common stock held in participant accounts under the Dow Savings Plan. Thus, participants in the Dow Savings Plan who tender shares of TDCC common stock held under the plan will be subject to proration even if they hold fewer than 100 shares under the plan. If an individual holds shares under the Dow Savings Plan, and also holds shares outside the plan, if the number of shares held outside the plan is fewer than 100, the shares held outside the plan will be eligible for the “odd-lots” preference without regard to the number of shares the individual holds under the plan.

Any beneficial holder of fewer than 100 shares of TDCC common stock outside of the Dow Savings Plan who wishes to tender all such shares without proration must complete the box entitled “Odd-Lot Shares” on the letter of transmittal. If your odd-lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment.

TDCC will announce the preliminary proration factor by press release as promptly as practicable after the expiration date. Upon determining the number of shares of TDCC common stock validly tendered for exchange, TDCC will announce the final results, including the final proration factor.

Any shares of TDCC common stock not accepted for exchange in this exchange offer as a result of proration or otherwise will be returned to the tendering shareholder promptly after the final proration factor is determined.

For purposes of this exchange offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, whereby Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin. Each

 

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outstanding share of Splitco common stock will be converted into the right to receive 0.87482759 shares of Olin common stock. In this conversion of shares of Splitco common stock into shares of Olin common stock, no fractional shares of Olin common stock will be delivered to holders of Splitco common stock. All fractional shares of Olin common stock that a holder of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by Olin’s transfer agent. Olin’s transfer agent will cause the whole shares obtained by such aggregation to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger, in the open market or otherwise, in each case at then-prevailing market prices as soon as practicable after the Merger. Olin’s transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable following the Merger to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Olin common stock in the Merger.

Exchange of Shares of TDCC Common Stock

Upon the terms and subject to the conditions of this exchange offer (including, if this exchange offer is extended or amended, the terms and conditions of the extension or amendment), TDCC will accept for exchange, and will exchange, for shares of Splitco common stock owned by TDCC, the shares of TDCC common stock validly tendered, and not properly withdrawn, prior to the expiration of this exchange offer, promptly after the expiration date.

The exchange of shares of TDCC common stock tendered and accepted for exchange pursuant to this exchange offer will be made only after timely receipt by the exchange agent of (a)(i) certificates representing all physically tendered shares of TDCC common stock or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of TDCC common stock in the exchange agent’s account at The Depository Trust Company, in each case pursuant to the procedures set forth in the section below entitled “—Procedures for Tendering,” (b) the letter of transmittal for TDCC common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

For purposes of this exchange offer, TDCC will be deemed to have accepted for exchange, and thereby exchanged, shares of TDCC common stock validly tendered and not properly withdrawn if and when TDCC notifies the exchange agent of its acceptance of the tenders of those shares of TDCC common stock pursuant to this exchange offer.

Upon the consummation of this exchange offer, TDCC will deliver to the exchange agent a global certificate representing all of the Splitco common stock being distributed in this exchange offer, with irrevocable instructions to hold the shares of Splitco common stock in trust for the holders of TDCC common stock validly tendered and not withdrawn in this exchange offer and, in the case of a pro rata distribution, holders of TDCC common stock whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer (as described below under “—Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer”). Olin will deposit in a reserve account with its transfer agent for the benefit of persons who received shares of Splitco common stock in this exchange offer book-entry authorizations representing shares of Olin common stock, with irrevocable instructions to hold the shares of Olin common stock in trust for the holders of Splitco common stock.

Upon surrender of the documents required by the exchange agent, duly executed, each former holder of Splitco common stock will receive in exchange therefor shares of Olin common stock and/or cash in lieu of fractional shares, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If TDCC does not accept for exchange any tendered TDCC common stock for any reason pursuant to the terms and conditions of this exchange offer, the exchange agent (a) in the case of shares of TDCC common stock held in certificated form, will return certificates representing such shares without expense to the tendering

 

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shareholder, (b) in the case of book-entry shares held through DRS, will cause those shares to be credited to the DRS account from which they were tendered, (c) in the case of CIP Shares, will cause those shares to be credited to the account under the Computershare CIP, a dividend reinvestment plan for TDCC, from which they were tendered and (d) in the case of shares tendered by book-entry transfer pursuant to the procedures set forth below in the section entitled “—Procedures for Tendering,” such shares will be credited to an account maintained with The Depository Trust Company, in each case promptly following expiration or termination of this exchange offer.

Holders of TDCC’s Cumulative Convertible Perpetual Preferred Stock Series A may participate in the exchange offer only to the extent they convert their preferred shares into TDCC common shares and validly transfer those TDCC common shares prior to the expiration of this Exchange Offer.

Procedures for Tendering

Shares Held in Certificated Form/Book-Entry DRS

If you hold certificates representing shares of TDCC common stock, or if your shares of TDCC common stock are held in book-entry via the Direct Registration System (“DRS”), you must deliver to the exchange agent at the address listed on the letter of transmittal a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents, and, if you hold certificates, the certificates representing the shares of TDCC common stock tendered.

CIP Shares

If you hold CIP Shares, you must deliver to the exchange agent at the address listed on the letter of transmittal for TDCC common stock a properly completed and duly executed letter of transmittal, together with any required signature guarantees and any other required documents. Since certificates are not issued for CIP Shares, you do not need to deliver any certificates representing those shares to the exchange agent. If you tender all of your CIP Shares, and all of your CIP Shares are accepted in this exchange offer, then your participation in the dividend reinvestment plan will be terminated and any dividend due will be paid in cash.

Shares Held Through a Broker, Dealer, Commercial Bank, Trust Company or Similar Institution

If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution and wish to tender your shares of TDCC common stock in this exchange offer, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your shares of TDCC common stock. If that institution holds shares of TDCC common stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the exchange agent’s account in accordance with The Depository Trust Company’s procedures. The institution must also ensure that the exchange agent receives an agent’s message from The Depository Trust Company confirming the book-entry transfer of your shares of TDCC common stock. A tender by book-entry transfer will be completed upon receipt by the exchange agent of an agent’s message, book-entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of TDCC common stock which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that TDCC may enforce that agreement against the participant.

The exchange agent will establish an account with respect to the shares of TDCC common stock at The Depository Trust Company for purposes of this exchange offer, and any eligible institution that is a participant in The Depository Trust Company may make book-entry delivery of shares of TDCC common stock by causing

 

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The Depository Trust Company to transfer such shares into the exchange agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange agent.

Shares Held in the Dow Savings Plan

If your account holds units of the TDCC Stock Fund (as described below) under the Dow Savings Plan, you may elect either to keep or to exchange some or all of the shares attributable to the units held in your account for shares of Splitco common stock. You will receive instructions from the Trustee via letter or email (as permitted by the Dow Savings Plan) informing you how to make an election. If you do not make a timely election in accordance with the Trustee’s instructions by the deadline set forth in the Trustee’s instructions, none of the shares attributable to the units of the TDCC Stock Fund held in your account under the Dow Savings Plan will be exchanged for shares of Splitco common stock and your holdings of units of the TDCC Stock Fund in your Dow Savings Plan account will remain unchanged. If you do timely elect to exchange shares attributable to units of the TDCC Stock Fund for Splitco common stock, in the Merger, each such share of Splitco common stock will be converted into the right to receive units of a unitized stock fund holding Olin common stock (as described further below) based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” For a more detailed description of how to tender your shares attributable to the units held in your account if you participate in the Dow Savings Plan, please refer to the specific instructions regarding how to tender such shares, if any, under the Dow Savings Plan, which will be included in the written information to be provided to you by the Trustee.

If you elect to exchange some or all of the shares attributable to units of the TDCC Stock Fund in your Dow Savings Plan account for shares of Splitco common stock, you may be required to liquidate any units representing shares of Olin common stock that you receive in exchange for such Splitco shares in connection with the Merger in your plan account no later than a date communicated by the Trustee (which could be immediately after the closing of the Merger or several months thereafter) and reallocate the sale proceeds to one or more of the other investment options then available under the Dow Savings Plan. If you do not liquidate such shares of Olin common stock prior to the liquidation deadline, the shares of Olin common stock in your Dow Savings Plan account will be liquidated by the Trustee on the liquidation deadline date with the proceeds invested as set forth in the instructions from the Trustee. If the offer to exchange shares of TDCC common stock for Splitco common stock is oversubscribed, the number of shares attributable to the units of the TDCC Stock Fund in your Dow Savings Plan account that you elect to exchange will be subject to proration. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “Summary—Terms of this Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of TDCC Common Stock.” Please contact the phone number in the letter or email you receive from the Trustee to speak with a customer service associate if you have not yet received instructions from the Trustee.

The TDCC Stock Fund under the Dow Savings Plan is a unitized stock fund holding TDCC common stock and cash and short-term investments maintained for liquidity purposes. Participants in the Dow Savings Plan whose accounts are invested in the TDCC Stock Fund have units in such fund allocated to their respective accounts, which units represent their respective pro rata interests in such fund. For purposes of this document and the exchange offer, references to shares of TDCC common stock being held in participant accounts under the Dow Savings Plan, elections to keep or tender such shares, and exchanges of such shares mean, with respect to a participant, the shares of TDCC common stock represented by the units in the TDCC Stock Fund allocated to the participant’s account under the plan.

In connection with the exchange, any shares of Olin common stock held under the Dow Savings Plan will be held in a unitized stock fund. In addition to holding Olin common stock, such Olin common stock fund may also hold cash and short-term investments for liquidity purposes. Accounts of plan participants who elect to participate in the exchange offer will receive units in the Olin common stock fund. For purposes of this document and the exchange offer, references to shares of Olin common stock being held in participant accounts under the

 

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Dow Savings Plan and liquidation of shares of Olin common stock mean, with respect to a participant, the shares of Olin common stock represented by the units in the Olin common stock fund allocated to the participant’s account under the plan.

Notwithstanding anything in this document to the contrary, with respect to shares of TDCC common stock held under the Dow Savings Plan, the terms of such plan and Trust and applicable law govern all transactions involving such shares of TDCC common stock. It is possible that the investment fiduciaries of the Dow Savings Plan, to fulfill their fiduciary obligations, will impose additional conditions and limitations on the participation of the plan and its participants in the exchange offer or will determine that investment in Olin common stock will not be a permitted investment. If that is the case, participants in the Dow Savings Plan will be so notified.

General Instructions

Do not send letters of transmittal and certificates representing shares of TDCC common stock to TDCC, Olin, Olin’s transfer agent, Splitco or the information agent. Letters of transmittal for shares of TDCC common stock and certificates representing shares of TDCC common stock should be sent to the exchange agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any certificates or stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by TDCC. Transmittal of tendered shares held in the Trust under the Dow Savings Plan will be made by the Trustee.

Whether you tender your shares of TDCC common stock by delivery of certificates, by the procedures applicable to book-entry shares held through DRS, by the procedures applicable to CIP Shares, or through your broker, the exchange agent must receive the letter of transmittal for shares of TDCC common stock and, if applicable, the certificates representing your shares of TDCC common stock at the address set forth on the back cover of this document prior to the expiration of this exchange offer. Alternatively, in case of a book-entry transfer of shares of TDCC common stock through The Depository Trust Company, the exchange agent must receive the agent’s message and a book-entry confirmation.

Letters of transmittal for shares of TDCC common stock and certificates representing shares of TDCC common stock must be received by the exchange agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the information agent if you have any questions regarding tendering your shares of TDCC common stock.

Signature Guarantees

Signatures on all letters of transmittal for TDCC common stock must be guaranteed by a firm which is a member of the Securities Transfer Agents Medallion Program, or by any other “eligible guarantor institution,” as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being a “U.S. eligible institution”), except in cases in which shares of TDCC common stock are tendered either (1) by a registered shareholder who has not completed the box entitled “Special Transfer Instructions” on the letter of transmittal, or (2) for the account of a U.S. eligible institution.

If the certificates representing shares of TDCC common stock are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by an eligible institution.

 

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Guaranteed Delivery Procedures

If you wish to tender shares of TDCC common stock pursuant to this exchange offer but (i) your certificates are not immediately available, (ii) you cannot deliver the shares or other required documents to the exchange agent on or before the expiration date of this exchange offer or (iii) you cannot comply with the procedures for book-entry transfer through The Depository Trust Company on a timely basis, you may still tender your TDCC common stock, so long as all of the following conditions are satisfied:

 

    you must make your tender by or through a U.S. eligible institution;

 

    on or before the expiration date, the exchange agent must receive a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by TDCC, in the manner provided below; and

 

    within three NYSE trading days after the date of execution of such notice of guaranteed delivery, the exchange agent must receive (i) (A) certificates representing all physically tendered shares of TDCC common stock and (B) in the case of shares delivered by-book entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of TDCC common stock in the exchange agent’s account at The Depository Trust Company; (ii) a letter of transmittal for shares of TDCC common stock properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message; and (iii) any other required documents.

Registered shareholders (including any participant in The Depository Trust Company whose name appears on a security position listing of The Depository Trust Company as the owner of TDCC common stock) may transmit the notice of guaranteed delivery by facsimile transmission or mail it to the exchange agent. If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must submit any notice of guaranteed delivery on your behalf.

Tendering Your Shares After the Final Exchange Ratio Has Been Determined

Subject to a Mandatory Extension, the final exchange ratio will be available no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date of this exchange offer. If you are a registered shareholder of shares of TDCC common stock (which includes persons holding certificated shares, book-entry shares held through DRS or CIP Shares), then it is unlikely that you will be able to deliver an original executed letter of transmittal (and, in the case of certificated shares, your share certificates) to the exchange agent prior to the expiration of this exchange offer at 8:00 a.m., New York City time, on the expiration date. Accordingly, in such a case, if you wish to tender your shares after the final exchange ratio has been determined, you will generally need to do so by means of delivering a notice of guaranteed delivery and complying with the guaranteed delivery procedures described above. If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf. If you hold units of the TDCC Stock Fund in your account under the Dow Savings Plan and you have elected to tender all or some of the shares attributable to such units, the Trustee will tender the applicable number of such shares on your behalf. Notwithstanding anything in this document to the contrary, with respect to shares of TDCC common stock held under the Dow Savings Plan, the terms of such plan and Trust and applicable law govern all transactions involving such shares of TDCC common stock. It is possible that the investment fiduciaries of the Dow Savings Plan, to fulfill their fiduciary obligations, will impose additional conditions and limitations on the participation of the plan and its participants in the exchange offer or will determine that the plan and its participants will not participate in the exchange offer. If that is the case, participants in the Dow Savings Plan will be so notified.

The Depository Trust Company is expected to remain open until 5:00 p.m., New York City time, on the last trading day prior to the expiration date and institutions may be able to process tenders for TDCC common stock through The Depository Trust Company during that time (although there is no assurance that this will be the case). Once The

 

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Depository Trust Company has closed, participants in The Depository Trust Company whose name appears on a Depository Trust Company security position listing as the owner of TDCC common stock will still be able to tender their TDCC common stock by delivering a notice of guaranteed delivery to the exchange agent via facsimile.

If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must submit any notice of guaranteed delivery on your behalf. It will generally not be possible to direct such an institution to submit a notice of guaranteed delivery once that institution has closed for the day. You should consult with such institution on the procedures that must be complied with and the time by which such procedures must be completed to ensure that the institution has ample time to submit a notice of guaranteed delivery on your behalf prior to expiration of this exchange offer at 8:00 a.m., New York City time, on the expiration date. In addition, any such institution, if it is not an eligible institution, will need to obtain a Medallion guarantee from an eligible institution in the form set forth in the applicable notice of guaranteed delivery in connection with the delivery of those shares.

If the upper limit on the number of shares that can be received for each share of TDCC common stock validly tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender their shares of TDCC common stock during those days. Any changes in the prices of TDCC common stock or Olin common stock on those additional days of this exchange offer will not, however, affect the exchange ratio.

Effect of Tenders

A tender of TDCC common stock pursuant to any of the procedures described above will constitute your acceptance of the terms and conditions of this exchange offer as well as your representation and warranty to TDCC that (1) you have the full power and authority to tender, sell, assign and transfer the tendered shares (and any and all other shares of TDCC common stock or other securities issued or issuable in respect of such shares), (2) when the same are accepted for exchange, TDCC will acquire good and unencumbered title to such shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims and (3) you own the shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act.

It is a violation of Rule 14e-4 under the Exchange Act for a person, directly or indirectly, to tender shares of TDCC common stock for such person’s own account unless, at the time of tender, the person so tendering (1) has a net long position equal to or greater than the amount of (a) shares of TDCC common stock tendered or (b) other securities immediately convertible into or exchangeable or exercisable for the shares of TDCC common stock tendered and such person will acquire such shares for tender by conversion, exchange or exercise and (2) will cause such shares to be delivered in accordance with the terms of this document. Rule 14e-4 provides a similar restriction applicable to the tender of guarantee of a tender on behalf of another person.

The exchange of shares of TDCC common stock validly tendered and accepted for exchange pursuant to this exchange offer will be made only after timely receipt by the exchange agent of (a)(i) certificates representing all physically tendered shares of TDCC common stock or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of TDCC common stock in the exchange agent’s account at The Depository Trust Company, (b) the letter of transmittal for shares of TDCC common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

Appointment of Attorneys-in-Fact and Proxies

By executing a letter of transmittal as set forth above, you irrevocably appoint TDCC’s designees as your attorneys-in-fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your shares of TDCC common stock tendered and accepted for exchange by TDCC and with respect to any and all other shares of

 

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TDCC common stock and other securities issued or issuable in respect of the TDCC common stock on or after the expiration of this exchange offer. That appointment is effective when and only to the extent that TDCC deposits the shares of Splitco common stock for the shares of TDCC common stock that you have tendered with the exchange agent. All such proxies will be considered coupled with an interest in the tendered shares of TDCC common stock and therefore will not be revocable. Upon the effectiveness of such appointment, all prior proxies that you have given will be revoked and you may not give any subsequent proxies (and, if given, they will not be deemed effective). TDCC’s designees will, with respect to the shares of TDCC common stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper. TDCC reserves the right to require that, in order for shares of TDCC common stock to be deemed validly tendered, immediately upon TDCC’s acceptance for exchange of those shares of TDCC common stock, TDCC must be able to exercise full voting rights with respect to such shares. In the case of tendered shares of TDCC common stock held in the Trust under the Dow Savings Plan, the Trustee will make an electronic election through its custodian and the provisions described in this paragraph regarding the irrevocable appointment of TDCC’s designees as attorneys-in-fact will apply to the Trustee.

Determination of Validity

TDCC will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of TDCC common stock, in TDCC’s sole discretion, and its determination will be final and binding. TDCC reserves the absolute right to reject any and all tenders of shares of TDCC common stock that it determines are not in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. TDCC also reserves the absolute right to waive any of the conditions of this exchange offer, or any defect or irregularity in the tender of any shares of TDCC common stock. No tender of shares of TDCC common stock is valid until all defects and irregularities in tenders of shares of TDCC common stock have been cured or waived. Neither TDCC nor the exchange agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in the tender of any shares of TDCC common stock or will incur any liability for failure to give any such notification. TDCC’s interpretation of the terms and conditions of this exchange offer (including the letter of transmittal and instructions thereto) will be final and binding.

Binding Agreement

The tender of shares of TDCC common stock pursuant to any of the procedures described above will constitute a binding agreement between TDCC and you (or between TDCC and the Trustee, in the case of tendered shares of TDCC common stock held in the Trust under the Dow Savings Plan) upon the terms of and subject to the conditions to this exchange offer.

The method of delivery of share certificates of TDCC common stock and all other required documents, including delivery through The Depository Trust Company, is at your option and risk, and the delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, it is recommended that you use registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

Partial Tenders

If you tender fewer than all the shares of TDCC common stock evidenced by any share certificate you deliver to the exchange agent, then you will need to fill in the number of shares that you are tendering in the section entitled “Stock Election” on the second page of the letter of transmittal. In those cases, as soon as practicable after the expiration date, the exchange agent will credit the remainder of the shares of common stock that were evidenced by the certificate(s) but not tendered to a DRS account in the name of the registered holder maintained by TDCC’s transfer agent, unless otherwise provided in “Special Delivery Instructions” in the letter of transmittal. Unless you indicate otherwise in your letter of transmittal, all of the shares of TDCC common stock represented by share certificates you deliver to the exchange agent will be deemed to have been validly

 

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tendered. No share certificates are expected to be delivered to you, including in respect of any shares delivered to the exchange agent that were previously in certificated form, except for share certificates representing shares not accepted in this exchange offer.

Lost, Stolen or Destroyed Certificates

If your certificate(s) representing shares of TDCC common stock have been mutilated, destroyed, lost or stolen and you wish to tender your shares, you will need to complete an affidavit of lost, stolen or destroyed certificate(s) (the “Affidavit”) that you may request by calling TDCC’s transfer agent, Computershare, at 1-800-369-5606. You will also need to post a surety bond for your lost, stolen or destroyed shares of TDCC common stock and pay a service fee. Upon receipt of the completed applicable letter of transmittal with the completed Affidavit, the surety bond payment and the service fee, your shares of TDCC common stock will be considered tendered in this exchange offer.

Withdrawal Rights

Shares of TDCC common stock validly tendered pursuant to this exchange offer may be withdrawn at any time before 8:00 a.m., New York City time, on the expiration date and, unless TDCC has previously accepted such shares pursuant to this exchange offer, may also be withdrawn at any time after the expiration of 40 business days from the commencement of this exchange offer (October 30, 2015). Once TDCC accepts shares of TDCC common stock pursuant to this exchange offer, your tender is irrevocable.

For a withdrawal of shares of TDCC common stock to be effective, the exchange agent must receive from you a written notice of withdrawal at one of its addresses set forth on the back cover of this document, and your notice must include your name and the number of shares of TDCC common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares.

If certificates have been delivered or otherwise identified to the exchange agent, the name of the registered holder and the serial numbers of the particular certificates evidencing the shares of TDCC common stock must also be furnished to the exchange agent, as stated above, prior to the physical release of the certificates. If shares of TDCC common stock have been tendered pursuant to the procedures for book-entry tender discussed in the section entitled “—Procedures for Tendering,” any notice of withdrawal must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with the procedures of The Depository Trust Company.

TDCC will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in its sole discretion, and its decision will be final and binding. Neither TDCC nor the exchange agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification.

Any shares of TDCC common stock properly withdrawn will be deemed not to have been validly tendered for purposes of this exchange offer. However, you may re-tender withdrawn shares of TDCC common stock by following one of the procedures discussed in the section entitled “—Procedures for Tendering” at any time prior to the expiration of this exchange offer (or pursuant to the instructions sent to you separately).

Except for the withdrawal rights described above, any tender made under this exchange offer is irrevocable.

Withdrawing Your Shares After the Final Exchange Ratio Has Been Determined

Subject to a Mandatory Extension, the final exchange ratio will be available no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date of this exchange offer. If you are a registered shareholder of TDCC common stock (which includes persons holding certificated shares book-entry shares held through DRS or CIP Shares) and you wish to withdraw your shares after the final exchange ratio has been

 

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determined, then you must deliver a written notice of withdrawal or facsimile transmission notice of withdrawal to the exchange agent prior to 8:00 a.m., New York City time, on the expiration date. Medallion guarantees will not be required for such withdrawal notices. If you hold shares of TDCC common stock through a broker, dealer, commercial bank, trust company or similar institution, any notice of withdrawal must be delivered by that institution on your behalf.

If units of the TDCC Stock Fund are held in your Dow Savings Plan account and you wish to withdraw your tendered shares attributable to such units after the final exchange ratio has been determined, you should refer to the procedures set forth in the Trustee’s informational materials provided to you. The Trustee will provide any transmission notice of withdrawal to the exchange agent on your behalf before 8:00 a.m., New York City time, on the expiration date.

The Depository Trust Company is expected to remain open until 5:00 p.m., New York City time, on the last trading day prior to the expiration date and institutions may be able to process withdrawals of TDCC common stock through The Depository Trust Company during that time (although there can be no assurance that this will be the case). Once The Depository Trust Company has closed, if you beneficially own shares of TDCC common stock that were previously delivered through The Depository Trust Company, then in order to properly withdraw your shares the institution through which your shares are held must deliver a written notice of withdrawal or facsimile transmission notice of withdrawal to the exchange agent prior to 8:00 a.m., New York City time, on the expiration date. Such notice of withdrawal must be in the form of The Depository Trust Company’s notice of withdrawal, must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. Shares can be properly withdrawn only if the exchange agent receives a withdrawal notice directly from the relevant institution that tendered the shares through The Depository Trust Company.

If the upper limit on the number of shares of Splitco common stock that can be exchanged for each share of TDCC common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date, which will permit shareholders to properly withdraw their shares of TDCC common stock during those days.

Book-entry Accounts

Certificates representing shares of Splitco common stock will not be issued to holders of TDCC common stock pursuant to this exchange offer. Rather than issuing certificates representing such shares of Splitco common stock to tendering holders of TDCC common stock, the exchange agent will cause shares of Splitco common stock to be credited to records maintained by the exchange agent for the benefit of the respective holders. Immediately following the consummation of this exchange offer, Merger Sub will in the Merger be merged with and into Splitco and each share of Splitco common stock will be converted into the right to receive Olin common stock and cash in lieu of fractional shares. In connection with this exchange offer, you will receive a letter of transmittal and instructions for use in effecting surrender of any certificates in exchange for Olin common stock and cash in lieu of fractional shares. As promptly as practicable following the Merger and TDCC’s notice and determination of the final proration factor, if any, Olin’s transfer agent will credit the shares of Olin common stock into which the shares of Splitco common stock have been converted to book-entry accounts maintained for the benefit of the TDCC shareholders who received shares of Splitco common stock in the exchange offer or as a pro rata distribution, if any, and will send these holders a statement evidencing their holdings of shares of Olin common stock.

Extension; Termination; Amendment

Extension, Termination or Amendment by TDCC

TDCC expressly reserves the right, in its sole discretion, at any time and from time to time to extend the period of time during which this exchange offer is open and thereby delay acceptance for payment of, and the

 

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payment for, any shares of TDCC common stock validly tendered and not properly withdrawn in this exchange offer. For example, this exchange offer can be extended if any of the conditions for the consummation of this exchange offer described in the next section entitled “—Conditions for the Consummation of this Exchange Offer” are not satisfied or waived prior to the expiration of this exchange offer.

TDCC expressly reserves the right, in its sole discretion, to amend the terms of this exchange offer in any respect prior to the expiration date, except that TDCC does not intend to extend this exchange offer other than in the circumstances described above.

If TDCC materially changes the terms of or information concerning this exchange offer or if TDCC waives a material condition of this exchange offer, it will extend this exchange offer if required by law. The SEC has stated that, as a general rule, it believes that an offer should remain open for a minimum of five business days from the date that notice of the material change is first given or in the event there is a waiver of a material condition to the exchange offer. The length of time will depend on the particular facts and circumstances.

As required by law, this exchange offer will be extended so that it remains open for a minimum of ten business days following the announcement if:

 

    TDCC changes the method for calculating the number of shares of Splitco common stock offered in exchange for each share of TDCC common stock; and

 

    this exchange offer is scheduled to expire within ten business days of announcing any such change.

If TDCC extends this exchange offer, is delayed in accepting for exchange any shares of TDCC common stock or is unable to accept for exchange any shares of TDCC common stock under this exchange offer for any reason, then, without affecting TDCC’s rights under this exchange offer, the exchange agent may retain all shares of TDCC common stock tendered on TDCC’s behalf. These shares of TDCC common stock may not be withdrawn except as provided in the section entitled “—Withdrawal Rights.”

TDCC’s reservation of the right to delay acceptance of any shares of TDCC common stock is subject to applicable law, which requires that TDCC pay the consideration offered or return the shares of TDCC common stock deposited promptly after the termination or withdrawal of this exchange offer.

TDCC will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any extension, amendment, non-acceptance or termination of the previously scheduled expiration date.

Mandatory Extension

TDCC will announce whether the upper limit on the number of shares that can be received for each share of TDCC common stock tendered is in effect at the last trading day prior to the expiration of the exchange offer period, at www.edocumentview.com/dowexchange and by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the limit and a Mandatory Extension will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their shares of TDCC common stock during those days. TDCC will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any such Mandatory Extension.

Method of Public Announcement

Subject to applicable law (including Rules 13e-4(d), 13e-4(e)(3) and 14e-1 under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with this exchange offer be promptly disclosed to shareholders in a manner reasonably designed to inform them of the

 

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change) and without limiting the manner in which TDCC may choose to make any public announcement, TDCC assumes no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to Business Wire.

Conditions for the Consummation of this Exchange Offer

TDCC will not be required to complete this exchange offer and may extend or terminate this exchange offer, if, at the scheduled expiration date any of the following conditions or events has occurred, or TDCC reasonably expects any of the following conditions or events to occur:

 

    any of the “Joint Conditions to the Merger” or “Additional Conditions to the Merger for TDCC’s Benefit” referenced in “The Merger Agreement—Conditions to the Merger” have not been satisfied or waived, as applicable, or for any reason the Transactions (other than this exchange offer) cannot be consummated promptly after consummation of this exchange offer;

 

    the Merger Agreement or the Separation Agreement has been terminated;

 

    any condition or event that TDCC reasonably believes would or would be likely to cause this exchange offer and/or any pro rata dividend of Splitco common shares distributed to TDCC shareholders if this exchange offer is undersubscribed to be taxable to TDCC or its shareholders under U.S. federal income tax laws;

 

    any injunction, order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority having jurisdiction over TDCC, Splitco or Olin and is in effect, or any law, statute, rule, regulation, legislation, interpretation, governmental order or injunction will have been enacted or enforced, any of which would reasonably be likely to restrain, prohibit or delay consummation of this exchange offer;

 

    any proceeding for the purpose of suspending the effectiveness of the registration statement of which this document is a part has been initiated by the SEC and not concluded or withdrawn;

 

    any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States;

 

    any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 15 percent in either the Dow Jones Average of Industrial Stocks or the Standard & Poor’s 500 Index within a period of 60 consecutive days or less occurring after September 1, 2015;

 

    a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States;

 

    a commencement of a war (whether declared or undeclared), armed hostilities or other national or international calamity or act of terrorism, directly or indirectly involving the United States, which would reasonably be expected to affect materially and adversely, or to delay materially, the consummation of this exchange offer, or if any of these situations exists as of the commencement of this exchange offer, any material deterioration of such situation;

 

    any action, litigation, suit, claim or proceeding is instituted that would be reasonably likely to enjoin, prohibit, restrain, make illegal, make materially more costly or materially delay the consummation of this exchange offer;

 

    any condition or event that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, assets, properties, condition (financial or otherwise) or results of operations of TDCC, Splitco or Olin; or

 

    a market disruption event (as defined below) occurs with respect to shares of TDCC common stock or Olin common stock on any of the Valuation Dates and such market disruption event has, in TDCC’s reasonable judgment, impaired the benefits of this exchange offer.

 

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Each of the foregoing conditions to the consummation of the exchange offer is independent of any other condition; the exclusion of any event from a particular condition above does not mean that such event may not be included in another condition. If any of the above events occurs, TDCC may:

 

    terminate this exchange offer and promptly return all tendered shares of TDCC common stock to tendering shareholders;

 

    extend this exchange offer and, subject to the withdrawal rights described in the section entitled “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights,” retain all tendered shares of TDCC common stock until the extended exchange offer expires;

 

    amend the terms of the exchange offer; or

 

    waive or amend any unsatisfied condition and, subject to any requirement to extend the period of time during which this exchange offer is open, complete this exchange offer.

These conditions are for the sole benefit of TDCC. TDCC may assert these conditions with respect to all or any portion of this exchange offer regardless of the circumstances giving rise to them (except any action or inaction by TDCC). TDCC expressly reserves the right, in its sole discretion, to waive any condition in whole or in part at any time. TDCC’s failure to exercise its rights under any of the above conditions does not represent a waiver of these rights (provided that the right has not otherwise become exercisable). Each right is an ongoing right which may be asserted at any time prior to the expiration of this exchange offer. All conditions for consummation of this exchange offer must be satisfied or waived by TDCC prior to the expiration of this exchange offer. Olin has no right to waive any conditions to this exchange offer.

A market disruption event with respect to either TDCC common stock or Olin common stock means a suspension, absence or material limitation of trading of TDCC common stock or Olin common stock on the NYSE for more than two hours of trading or a breakdown or failure in the price and trade reporting systems of the NYSE as a result of which the reported trading prices for TDCC common stock or Olin common stock on the NYSE during any half-hour trading period during the principal trading session in the NYSE are materially inaccurate, as determined by TDCC or the exchange offer agent in its sole discretion, on the day with respect to which such determination is being made. For purposes of such determination, a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the NYSE.

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

The following discusses the material U.S. federal income tax consequences to “U.S. holders” (as defined below) of the Distribution (which includes this exchange offer) and the Merger. The discussion that follows is based on the Code, Treasury regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this document and all of which are subject to change at any time, possibly with retroactive effect. The discussion assumes that the Distribution, the Merger and the related Transactions will be consummated in accordance with the Separation Agreement and the Merger Agreement and as further described in this document. This is not a complete description of all of the tax consequences of the Distribution, the Merger and related Transactions and, in particular, may not address U.S. federal income tax considerations applicable to TDCC shareholders subject to special treatment under the U.S. federal income tax law, such as financial institutions, dealers in securities, traders in securities who elect to apply a mark-to-market method of accounting, insurance companies, tax-exempt entities, partnerships and other pass-through entities, holders who acquired their TDCC common stock as compensation, and holders who hold TDCC common stock as part of a “hedge,” “straddle,” “conversion” or “constructive sale” transaction. This discussion does not address the tax consequences to any person who actually or constructively owns more than five percent of TDCC common stock.

This discussion is limited to shareholders of TDCC that are U.S. holders. For purposes of this document, a “U.S. holder” means a shareholder of TDCC other than an entity or arrangement treated as a partnership for U.S. federal income tax purposes, that for U.S. federal income tax purposes is or is treated as:

 

    an individual who is a citizen or resident of the United States;

 

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    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any political subdivision thereof;

 

    an estate, the income of which is subject to United States federal income taxation regardless of its source; or

 

    a trust if it (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) was in existence on August 20, 1996, and has properly elected under applicable U.S. Treasury regulations to be treated as a U.S. person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds TDCC common stock, the tax treatment of a partner in such entity or arrangement generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding TDCC common stock, please consult your tax advisor.

In addition, this discussion does not address the U.S. federal income tax consequences to TDCC shareholders who do not hold common stock of TDCC as a capital asset for U.S. federal income tax purposes. No information is provided in this document with respect to the tax consequences of the Distribution, the Merger and related Transactions under any applicable foreign, state or local laws.

TDCC shareholders are urged to consult with their own tax advisors regarding the tax consequences of the Distribution, the Merger and related Transactions to them, as applicable, including the effects of U.S. federal, state, local, foreign and other tax laws.

The Distribution

The consummation of the Distribution and the related Transactions are conditioned upon, among other things, the receipt of the TDCC RMT Tax Opinion from Shearman & Sterling LLP, tax counsel to TDCC, substantially to the effect that (among other things) the Distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes. The TDCC RMT Tax Opinion will be based on, among other things, certain facts, assumptions as well as the accuracy of certain representations, statements and undertakings made to counsel. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, the TDCC RMT Tax Opinion may be invalid. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached in the opinion.

On the basis that the Distribution, together with certain related transactions, qualifies as a “reorganization” for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes: (i) no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of TDCC common stock upon the receipt of Splitco common stock in this exchange offer or in any pro rata distribution of Splitco common stock distributed to holders of TDCC common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer); (ii) in a split-off, the aggregate tax basis of the shares of Splitco common stock (including fractional shares) issued to a holder of TDCC common stock will equal the aggregate tax basis of the shares of TDCC common stock exchanged therefor; (iii) the aggregate tax basis of any shares of Splitco common stock (including fractional shares) issued as a pro rata distribution to holders of TDCC common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer) will be determined by allocating the aggregate tax basis of such holder in the shares of TDCC common stock with respect to which the pro rata distribution is made immediately before such distribution between such TDCC common stock and the Splitco common stock in proportion to the relative fair market value of each immediately following such distribution; and (iv) the holding period of any shares of Splitco common stock received by a holder of TDCC common stock will include the holding period at the time of the consummation of this exchange offer of the shares of TDCC common stock with respect to which the shares of Splitco common stock were received, provided that the TDCC common stock is held as a capital asset on the date of the consummation of this exchange offer.

 

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The consummation of the Distribution (which includes this exchange offer) is also conditioned upon the receipt of the Private Letter Ruling (as defined above in “Helpful Information”). On July 17, 2015, TDCC announced that it had received a favorable private letter ruling from the IRS with respect to certain aspects of the Separation and Distribution. Although a private letter ruling from the IRS generally is binding on the IRS, TDCC and Splitco will not be able to rely on the Private Letter Ruling if the factual representations made to the IRS in connection with the Private Letter Ruling request prove to be inaccurate, or incomplete, in any material respect, or if undertakings made to the IRS in connection with the request for the Private Letter Ruling are not satisfied.

In general, if the Distribution does not qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Code, the exchange offer would be treated as a taxable exchange to TDCC shareholders who receive Splitco common stock in the exchange offer and the pro rata distribution of Splitco common stock if this exchange offer is undersubscribed (or if TDCC determines not to consummate the exchange offer) would be treated as a taxable dividend to TDCC shareholders who receive such distribution in an amount equal to the fair market value of the Splitco common stock received, to the extent of such shareholder’s ratable share of TDCC’s earnings and profits.

The Merger

The obligations of TDCC, Splitco, Olin and Merger Sub to consummate the Merger are conditioned, respectively, on TDCC’s and Splitco’s receipt of the TDCC RMT Tax Opinion and Olin’s receipt of a tax opinion (the “Merger Tax Opinion”) from their respective tax counsel, in each case substantially to the effect that the Merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code. These opinions will be based on, among other things, certain representations and assumptions as to factual matters made by TDCC, Splitco, Olin, and Merger Sub. The failure of any factual representation or assumption to be true, correct and complete in all material respects could adversely affect the validity of the opinions. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached in the opinion. In addition, the TDCC RMT Tax Opinion and the Merger Tax Opinion will be based on current law, and cannot be relied on if current law changes with retroactive effect. The obligation of TDCC to consummate the Merger is also conditioned on the receipt of the Private Letter Ruling (as defined above in “Helpful Information”).

On the basis that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, in general, for U.S. federal income tax purposes: (i) no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of Splitco common stock upon the receipt of Olin common stock in the Merger, except for any gain or loss recognized with respect to cash received in lieu of a fractional share of Olin common stock; (ii) gain or loss will be recognized by holders of Splitco common stock on any cash received in lieu of a fractional share of Olin common stock in the Merger equal to the difference between the amount of cash received in lieu of the fractional share and the holder’s tax basis in the fractional share of Olin common stock (determined in the manner described in clause (ii) or (iii), as applicable under the section entitled “—The Distribution”; such gain or loss will be long-term capital gain or loss if the holder’s holding period for all of its Splitco common stock (determined in the manner described in clause (iv) under the section entitled “—The Distribution”) is more than one year as of the closing date of Merger, and the deductibility of capital losses is subject to limitations under the Code; (iii) the tax basis of Olin common stock received in the Merger, including any fractional share of Olin common stock deemed received, will be the same as the tax basis in the shares of Splitco common stock deemed exchanged therefor; and (iv) the holding period of Olin common stock received by a holder of Splitco common stock in the Merger will include the holding period of the Splitco common stock exchanged therefor.

Information Reporting and Backup Withholding

U.S. Treasury regulations generally require holders who own at least five percent of the total outstanding stock of TDCC and who receive Splitco common stock pursuant to the Distribution and holders who own at least one percent of the total outstanding stock of Splitco and who receive Olin common stock pursuant to the Merger

 

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to attach to his, her or its U.S. federal income tax return for the year in which the Distribution and the Merger occur a detailed statement setting forth certain information relating to the tax-free nature of the Distribution and the Merger, as the case may be. TDCC and/or Olin will provide the appropriate information to each holder upon request, and each such holder is required to retain permanent records of this information.

In addition, payments of cash to a holder of Splitco common stock in lieu of fractional shares of Olin common stock in the Merger may be subject to information reporting, unless the holder provides proof of an applicable exemption. Such payments that are subject to information reporting may also be subject to backup withholding (at a rate of 28 percent), unless such holder provides a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute an additional tax, but merely an advance payment, which may be refunded or credited against a holder’s U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

THE FOREGOING IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS OF THE DISTRIBUTION AND THE MERGER UNDER CURRENT LAW AND FOR GENERAL INFORMATION ONLY. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS. EACH TDCC SHAREHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION AND THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Treatment of Specified TDCC Compensatory Equity-Based Awards Held by Current Splitco Employees

Unless otherwise required by applicable law, effective as of the date of the Merger, TDCC will take all necessary action to cause the outstanding, unvested stock awards held by current Splitco Employees that (as defined in the section entitled “Other Agreements—Employee Matters Agreement—Identification of Transferring Employees”) were issued under TDCC’s Amended and Restated 2012 Stock Incentive Plan, TDCC’s 1998 Award and Option Plan, TDCC’s Dividend Unit Plan and each other TDCC plan providing for the grant of equity-based awards, to continue to vest and to otherwise be treated in accordance with their terms and conditions and those of the applicable TDCC plan. TDCC will, to the extent permitted pursuant to applicable law and the applicable terms of the TDCC plans, take such actions as may be necessary or appropriate to amend the exercise period with respect to all outstanding Dow stock options held by current Splitco Employees to cause them to expire on their originally scheduled expiration dates. Furthermore, following the Merger, TDCC shall take all necessary action to cause the waiver of all claw back rights with respect to (i) any outstanding TDCC stock options held by current Splitco Employees and (ii) any TDCC stock options exercised by current Splitco Employees during the one-year period prior to the date of the Merger. TDCC will be responsible for the tax reporting and remitting the amounts of any taxes required to be withheld to the appropriate governmental authority in connection with equity-based awards held by current Splitco Employees.

Any changes to these equity-based awards as described in this paragraph shall confer no additional rights on any recipient to participate in this exchange offer except to the extent that such awards have vested (in the case of stock awards) and/or been exercised (in the case of options) and only to the extent that the applicable shares of TDCC stock have been settled and delivered to the recipient.

Fees and Expenses

TDCC has retained Georgeson Inc. to act as the information agent and Computershare to act as the exchange agent in connection with this exchange offer. The information agent may contact holders of TDCC common stock by mail, e-mail, telephone, facsimile transmission and personal interviews and may request

 

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brokers, dealers and other nominee shareholders to forward materials relating to this exchange offer to beneficial owners. The information agent and the exchange agent each will receive reasonable compensation for their respective services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against specified liabilities in connection with their services, including liabilities under the federal securities laws.

Neither the information agent nor the exchange agent has been retained to make solicitations or recommendations with respect to this exchange offer. The fees they receive will not be based on the number of shares of TDCC common stock tendered under this exchange offer.

TDCC will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of TDCC common stock under this exchange offer. TDCC will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.

No broker, dealer, bank, trust company or fiduciary will be deemed to be TDCC’s agent or the agent of Splitco, the information agent or the exchange agent for purposes of this exchange offer.

Legal Limitations

This document is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of TDCC common stock, Splitco common stock or Olin common stock in any jurisdiction in which the offer, sale or exchange is not permitted. It will not be possible to trade the shares of Splitco common stock after the consummation of this exchange offer and prior to the consummation of the Merger or during any other period.

Certain Matters Relating to Non-U.S. Jurisdictions

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of TDCC, Splitco or Olin have taken any action under non-U.S. regulations to facilitate a public offer to exchange shares of TDCC common stock, Splitco common stock or Olin common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of TDCC common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for TDCC, Olin or Splitco to take any action to facilitate a public offering in that country. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of TDCC common stock, Splitco common stock or Olin common stock that may apply in their home countries. TDCC, Olin and Splitco cannot provide any assurance about whether such limitations may exist.

Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer

If this exchange offer is consummated but fewer than all of the issued and outstanding shares of Splitco common stock are exchanged because the exchange offer is not fully subscribed, TDCC will distribute the remaining shares of Splitco common stock on a pro rata basis to TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of this exchange offer. The record date for the pro rata distribution, if any, will be announced by TDCC.

 

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Upon the consummation of this exchange offer, TDCC will irrevocably deliver to the exchange agent a global certificate representing all of the Splitco common stock being distributed by TDCC, with irrevocable instructions to hold the shares of Splitco common stock in trust for the holders of shares of TDCC common stock validly tendered and not properly withdrawn in the exchange offer and, in the case of a pro rata distribution, if any, TDCC shareholders whose shares of TDCC common stock remain outstanding after the consummation of the exchange offer. Olin will deposit in a reserve account with its transfer agent, for the benefit of persons who received shares of Splitco common stock in this exchange offer, book-entry authorizations representing shares of Olin common stock, with irrevocable instructions to hold the shares of Olin common stock in trust for the holders of Splitco common stock.

Upon surrender of the documents required by the exchange agent, duly executed, each former holder of Splitco common stock will receive, in exchange therefor, shares of Olin common stock and/or cash in lieu of fractional shares, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of TDCC Common Stock.”

If this exchange offer is terminated by TDCC without the exchange of shares, but the conditions for the consummation of the Transactions have otherwise been satisfied, TDCC intends to distribute all shares of Splitco common stock owned by TDCC on a pro rata basis to holders of TDCC common stock, with a record date to be announced by TDCC.

 

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INFORMATION ON OLIN

Overview

Olin Corporation is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, Missouri. Olin is a manufacturer concentrated in three business segments: Chlor Alkali Products, Chemical Distribution and Winchester. Chlor Alkali Products manufactures and sells chlorine and caustic soda, hydrochloric acid, hydrogen, bleach products and potassium hydroxide, which represented 56 percent of Olin’s 2014 sales. Chemical Distribution manufactures bleach products and distributes caustic soda, bleach products, potassium hydroxide and hydrochloric acid, which represented 12 percent of Olin’s 2014 sales. Winchester products, which represented 32 percent of Olin’s 2014 sales, include sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.

On August 22, 2012, Olin acquired 100 percent of privately-held K. A. Steel Chemicals Inc. (“KA Steel”), whose operating results are included in Olin’s historical financial statements since the date of the acquisition. For segment reporting purposes, KA Steel comprises the Chemical Distribution segment. KA Steel is one of the largest distributors of caustic soda in North America and manufactures and sells bleach in the Midwest.

For a more detailed description of the business of Olin, see Olin’s Quarterly Report on Form 10-Q for the three months ended June 30, 2015 and Olin’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is incorporated by reference in this document. See “Where You Can Find More Information; Incorporation by Reference.”

Olin’s Business After the Consummation of the Transactions

The combination of DCP with Olin’s existing business is intended to make Olin a leading, low-cost global player in chlor-alkali and related derivatives. Upon the consummation of the Transactions, Olin believes it will be: (1) the largest chlor-alkali producer in the world, (2) the largest seller of merchant chlorine, industrial bleach and on-purpose hydrochloric acid in North America, (3) the largest seller of chlorinated organics in the world, and (4) the largest global supplier of epoxy materials.

Olin expects the Transactions to have the following strategic benefits:

 

    Increased production capacity and diversification of Olin’s product portfolio. As a result of the Transactions, Olin expects the combined company’s chlorine production capacity to increase by nearly 200 percent over Olin’s existing production capacity on a stand-alone basis. Accordingly, Olin expects that the combined company will be able to access new product segments and increase sales to new third-party customers. Additionally, Olin believes that the combined company will have a more diverse portfolio of product offerings, with the increase of the number of downstream applications of Olin’s chlorine from three downstream applications to 19 downstream applications.

 

    Enhanced size and geographic presence. Olin will significantly increase its size and broaden its geographic footprint with the addition of DCP, providing enhanced presence in markets in North America, Europe, Latin America and Asia. Olin expects that this enhanced size and geographic presence will enable Olin to improve its cost structure and increase profitability.

 

    Increased market capitalization and liquidity. The consummation of the Transactions will increase Olin’s market capitalization and shares outstanding. Moreover, the Transactions will also improve Olin’s access to the capital markets by providing it with more diversified operations, a substantially increased portfolio of assets and increased scale, all of which will make Olin more attractive to both debt and equity investors and institutional lenders.

Prior to the consummation of the Transactions, certain functions (such as purchasing, information systems, accounts payable processing, accounts receivable management, logistics and distribution) for DCP have generally been performed under TDCC’s centralized systems and, in some cases, under contracts that are also

 

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used for TDCC’s other businesses which are not being assigned to Splitco as part of the Transactions. To enable Olin to manage an orderly transition in its operation of DCP, Splitco and TDCC will enter into the General Services Agreement. Pursuant to the General Services Agreement, TDCC will provide Splitco with certain transition services from the period beginning on the date of the Distribution and generally ending within one year, or a shorter or longer period for certain specific services. See “Other Agreements—Other Ancillary Agreements—General Services Agreement.”

Olin’s Liquidity and Capital Resources After the Consummation of the Transactions

As of June 30, 2015, Olin had total assets of $2,701 million, current liabilities of $509 million and long-term debt of $528 million. Following the consummation of the Transactions, Olin’s total assets and liabilities will increase significantly. As of June 30, 2015, on a pro forma basis (as described in “Unaudited Pro Forma Condensed Combined Financial Statements of Olin and the Dow Chlorine Products Business”), Olin would have had total assets of $9,651 million, current liabilities of $1,255 million and long-term debt of $3,424 million. Olin’s cash from operations was $48 million for the six months ended June 30, 2015. Olin also expects its cash from operations to increase significantly as a result of the consummation of the Transactions and the integration of DCP.

Olin believes that the combination of DCP with Olin’s existing business will result in anticipated annualized cost synergies of approximately $200 million within three years following the consummation of the Transactions as a result of (1) approximately $50 million in expected savings from procurement and logistics, (2) approximately $70 million in expected savings from improved operating efficiencies and (3) approximately $80 million in expected savings from asset optimization. If Olin is able to increase sales to new third-party customers and access new product markets as a result of the Transactions, Olin estimates that additional annualized synergies of up to $100 million may potentially be achievable within three years from the consummation of the Transactions. Olin expects to incur significant, one-time costs in connection with the Transactions, including approximately (1) $55 to $60 million during 2015 of advisory, legal, accounting, integration and other professional fees related to the Transactions, (2) $25 to $30 million of financing-related fees, (3) $50 million of costs associated with the change in control mandatory acceleration of expenses under deferred compensation plans as a result of the Transactions, (4) $100 to $150 million in transition-related costs during the first three years following the consummation of the Transactions and (5) $200 million in incremental capital spending during the first three years following the consummation of the Transactions that Olin management believes are necessary to realize the anticipated synergies from the Transactions. No assurances of the timing or amount of synergies able to be captured, or the costs necessary to achieve those synergies, can be provided.

Following the consummation of the Transactions, Olin and Splitco, a wholly-owned subsidiary of Olin, will have incurred new indebtedness in the form of debt securities, term loans or a combination thereof, a portion of which will be used to finance the Special Payment in an amount equal to the Below Basis Amount, and issued directly to TDCC the Splitco Securities in an amount equal to the Above Basis Amount, and these obligations incurred by Splitco are expected to be guaranteed by Olin following the consummation of the Merger. In connection with the Transactions, Olin has entered into the Olin Credit Agreement, which will replace Olin’s existing senior revolving credit facility with a new $500 million senior revolving credit facility.

In the Transactions, Olin’s U.S. tax-qualified defined benefit pension plan will, in accordance with TDCC’s election, assume certain U.S. tax-qualified defined benefit pension obligations related to active employees and certain terminated, vested retirees of DCP with a net liability of approximately $273 million, which amount remains subject to adjustment and will be finally determined as of the closing date of the merger. In connection therewith, pension assets may be transferred from TDCC’s U.S. tax-qualified defined benefit pension plans to an existing U.S. tax-qualified defined benefit pension plan maintained by Olin. In addition to the standard minimum funding requirements, the Pension Act requires companies with U.S. tax-qualified defined benefit pension plans to make contributions to such plans as frequently as quarterly in order to meet the “funding target” for such

 

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plans, as defined in the Pension Act. The failure to meet a minimum required percentage of the funding target in any given year could result in adverse consequences, including the imposition of fines or penalties. Funding obligations with respect to U.S. tax-qualified defined benefit pension plans change due to, among other things, the actual investment return on plan assets and changes in interest rates. Continued volatility in the capital markets may have a further negative impact on the funded status of U.S. tax-qualified defined benefit pension plans, which may in turn increase attendant funding obligations. Given the amount of pension assets that may be transferred from TDCC’s U.S. tax-qualified defined benefit pension plans to Olin’s U.S. tax-qualified defined benefit pension plan, and subject to the foregoing and other variables, and the uncertainties associated therewith, it is possible that Olin could be required to make substantial additional contributions in future years to Olin’s tax-qualified defined benefit pension plan attributable to the transferred pension liabilities that eventually transfer. These contributions could restrict available cash for Olin’s operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity.

In addition, in the Transactions, Olin will assume certain accrued defined benefit pension liabilities relating to employees of TDCC in Germany and Switzerland who transfer to Olin in connection with the Transactions. These liabilities and the related future payment obligations could restrict cash available for Olin operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity.

Olin anticipates that its primary sources of liquidity for working capital and operating activities, including any future acquisitions, will be cash from operations and borrowings under existing debt arrangements, including the Existing Credit Facilities, or a new credit facility. Olin expects that these sources of liquidity will be sufficient to make required payments of interest on the outstanding Olin debt and to fund working capital and capital expenditure requirements, including the significant one-time costs relating to the Transactions described above. Olin expects that it will be able to comply with the financial and other covenants of its existing debt arrangements, including the Existing Credit Facilities, and the covenants under the agreements governing the New Credit Facilities and the Sumitomo Term Facility and the indentures governing the Splitco Securities and the Other Splitco Debt Securities.

For more information on DCP’s and Olin’s existing sources of liquidity, see the section of this document entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Dow Chlorine Products Business” and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Olin’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and Olin’s Annual Report on Form 10-K for the year ended December 31, 2014, each of which is filed with the SEC and incorporated by reference in this document. See “Where You Can Find More Information; Incorporation by Reference.”

Directors and Officers of Olin Before and After the Consummation of the Transactions

Board of Directors

The Olin Board currently consists of nine directors, which are divided into three classes as follows:

 

    Class I directors (terms expire in 2016): C. Robert Bunch, Randall W. Larrimore and John M. B. O’Connor

 

    Class II directors (terms expire in 2017): Gray G. Benoist, Richard M. Rompala and Joseph D. Rupp

 

    Class III directors (terms expire in 2018): Donald W. Bogus, Philip J. Schulz and Vincent J. Smith

In connection with the Transactions, the size of the Olin Board will be increased to include three additional directors to be designated by TDCC, effective at the time of closing of the Merger.

 

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Listed below is the biographical information for each person who is currently a member of the Olin Board:

GRAY G. BENOIST, 63, served as Senior Vice President, Finance, Chief Financial Officer and Chief Accounting Officer of Belden, Inc. (a designer, manufacturer and marketer of signal transmission solutions, including cable, connectivity and active components for mission-critical applications in markets ranging from industrial automation to data centers, broadcast studios, and aerospace) until January 1, 2012, and as an Officer on Special Assignment until his retirement on March 15, 2012. From August 2006 until January 1, 2012 he served as Senior Vice President, Finance and Chief Financial Officer of Belden and from November 2009 until January 2012 he also served as Chief Accounting Officer. Prior to that time, Mr. Benoist was Senior Vice President, Director of Finance of the Networks Segment of Motorola Inc. (a business unit responsible for the global design, manufacturing, and distribution of wireless and wired telecom system solutions). During more than 25 years with Motorola, Mr. Benoist served in senior financial and general management roles across Motorola’s portfolio of businesses, including the Personal Communications Sector, Integrated and Electronic Systems Sector, Multimedia Group, Wireless Data Group, and Cellular Infrastructure Group. He has a bachelor’s degree in Finance & Accounting from Southern Illinois University and a master’s in business administration degree from the University of Chicago. Mr. Benoist serves on the board of directors of Exceptional Minds (a not-for-profit organization established to educate and prepare young adults on the autistic spectrum for employment in the graphic arts industry). He is also a principal of MindSpark, Inc. (a registered benefit corporation in California delivering software testing services through the employment of young adults with autism spectrum disorder). Olin director since February 2009; member of the Audit Committee and the Directors and Corporate Governance Committee. Mr. Benoist’s chief financial officer experience provides him with valuable financial and accounting expertise.

DONALD W. BOGUS, 68, retired in January 2009 from his position as Senior Vice President of The Lubrizol Corporation and President of Lubrizol Advanced Materials, Inc., a wholly-owned subsidiary of The Lubrizol Corporation (a global supplier of high performance specialty products for personal care, coatings, plastics, and various industrial products), a position he had held since June 2004. Mr. Bogus joined Lubrizol in April 2000 as Vice President and his duties included responsibility for the Fluid Technologies for Industry business section and he served as the head of mergers and acquisitions. Prior to joining Lubrizol, he was an Executive Officer at PPG Industries, Inc. (a manufacturer of coatings and glass products) where he served as Vice President of Specialty Chemicals and Vice President of Industrial Coatings. Mr. Bogus earned a bachelor’s degree in biology and chemistry from Baldwin Wallace University. He serves on the board of trustees for Baldwin Wallace University and on their Business Division’s advisory board. Olin director since July 2005; member of the Compensation Committee and the Directors and Corporate Governance Committee. Mr. Bogus’ executive management positions have provided him with expertise in the chemicals industry, as well as merger and acquisition experience.

C. ROBERT BUNCH, 61, served as Chairman of the Board and Chief Executive Officer of Global Tubing, LLC (a privately held company formed in April 2007 to manufacture and sell coiled tubing and related products and services to the energy industry which was acquired by Forum Energy Technologies, Inc. (NYSE: FET) and Quantum Energy Partners in July 2013) from May 2007 until June 2013. Mr. Bunch served as Chairman of Maverick Tube Corporation (a producer of welded tubular steel products used in energy and industrial applications which was acquired by Tenaris, S.A. in October 2006) from January 2005 until October 2006 and as President and Chief Executive Officer from October 2004 until October 2006. Prior to joining Maverick, he was an independent oil service consultant from 2003 until 2004, and from 2002 to 2003 he served as President and Chief Operating Officer at Input/Output, Inc. (an independent provider of seismic imaging technologies and digital, full-wave imaging solutions for the oil and gas industry). From 1999 to 2002, he served as Vice President and Chief Administrative Officer of Input/Output, Inc. Mr. Bunch earned a bachelor’s degree in economics and a master’s degree in accounting from Rice University and a juris doctorate degree from the University of Houston. From May 2004 until August 2008, Mr. Bunch served on the board of directors (and as Chairman from January 2007 to August 2008) of Pioneer Drilling Company (a provider of land contract drilling services to independent and major oil and gas exploration and production companies). Olin director since December 2005;

 

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member of the Compensation Committee and the Directors and Corporate Governance Committee. Mr. Bunch’s broad management responsibilities provide relevant experience in a number of strategic and operational areas.

RANDALL W. LARRIMORE, 68, served as the Chairman of Olin from April 2003 through June 2005. From 1997 until his retirement in December 2002, he served as President and Chief Executive Officer of United Stationers Inc. (a $4 billion wholesaler/distributor of office products). From 1988 until 1997, he was President and Chief Executive Officer of MasterBrand Industries, Inc., now called Fortune Brands Home & Security LLC (FBHS) (a consumer products company). He holds a bachelor’s degree from Swarthmore College with a major in economics and a minor in chemistry and a master’s in business administration degree from Harvard Business School. He is co-chair of the governance committee and a member of the board of directors and compensation committee of Campbell Soup Company (a manufacturer and marketer of soup and other food products) and a member of the board of directors of Nixon Uniform Service and Medical Wear (a privately held company that provides, launders, and delivers medical apparel, linens, and other reusable products, primarily to healthcare providers). Olin director since January 1998; Chair of the Directors and Corporate Governance Committee and a member of the Audit Committee, Compensation Committee and the Executive Committee. Mr. Larrimore brings expertise in marketing, sales, strategic planning, mergers and acquisitions and general management.

JOHN M. B. O’CONNOR, 61, is Chairman and Chief Executive Officer of J.H. Whitney Investment Management, LLC (a company which specializes in financing sustainable and resilient energy technologies and projects), a position he has held since 2011. From January 2009 through March 2011, he served as Chief Executive Officer of Tactronics Holdings, LLC (a Whitney Capital Partners portfolio holding company that provided tactical integrated electronic systems to U.S. and foreign military customers as well as the composite armor solutions for military vehicles through its Armostruxx division). Previously, Mr. O’Connor was Chairman of JP Morgan Alternative Asset Management, Inc. (part of the investment manager arm of JP Morgan) and an Executive Partner of JP Morgan Partners (a private equity firm). He was also a member of the Risk Management Committee of JP Morgan Chase, which was responsible for policy formulation and oversight of all market and credit risk taking activities globally. Mr. O’Connor earned a bachelor’s degree in economics from Tulane University and a master’s in business administration degree from Columbia University Graduate School of Business. Mr. O’Connor is a member of the board of directors at Integrico, Inc. (a privately held specialized composite products manufacturer). He also serves on the advisory board of Cornell University College of Veterinary Medicine, Game Conservancy USA and Grayson-Jockey Club Research Foundation. He is also on the advisory committees of Global Guardian and New York Green Bank. He is also chairman of the American Friends of the Clock Tower Fund and treasurer of the UK Game Conservancy and Wildlife Trust. Mr. O’Connor serves as a special consultant in a pro bono capacity for the U.S. Department of Defense and is an appointed special consultant to the Department of Defense Business Board. Mr. O’Connor has been appointed to be the Civic Aide to the Secretary of the Army (CASA) for New York (South). He is a member of the Air Force Chief of Staff Civic Leaders Board. Olin director since January 2006; member of the Audit Committee and the Directors and Corporate Governance Committee. Mr. O’Connor’s hedge fund and investment banking experience allow him to contribute broad financial and global expertise.

RICHARD M. ROMPALA, 68, retired in July 2005 from his position as Chairman of The Valspar Corporation (a manufacturer and distributor of paints and coatings). Mr. Rompala served as Chairman of Valspar from 1998 until July 2005, Chief Executive Officer from 1995 through February 2005 and President from 1994 through 2001. Prior to 1994, Mr. Rompala served as Group Vice President-Coatings and Resins for two years and Group Vice President-Chemicals for five years at PPG Industries, Inc. (a manufacturer of coatings and glass products). Mr. Rompala holds a bachelor’s degree in chemistry and a bachelor’s degree in chemical engineering from Columbia University and a master’s in business administration degree from Harvard Business School. Olin director since January 1998; Lead Director, Chair of the Compensation Committee and member of the Audit Committee, Directors and Corporate Governance Committee and the Executive Committee. Mr. Rompala’s broad executive management experience provides him with in-depth knowledge of manufacturing and chemicals companies.

 

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JOSEPH D. RUPP, 65, is Chairman and Chief Executive Officer of Olin. He has served as Chairman of Olin since July 2005 and held the positions of President from January 2002 until May 2014 and Chief Executive Officer since January 2002. Prior to that and since March 2001, he was Executive Vice President, Operations, and was responsible for all Olin business operations including the former Brass Division (which became part of the former Metals Group in 2002), Winchester and Chlor Alkali Products. He joined Olin’s Brass Division in 1972 and held a number of positions of increasing responsibility in the Brass Division manufacturing and engineering organization. In 1985, he was appointed Vice President, Manufacturing and Engineering. He was appointed President of Olin Brass and a Corporate Vice President in 1996. He holds a bachelor’s degree in metallurgical engineering from the University of Missouri, Rolla. Mr. Rupp serves on the board of directors of Quanex Building Products Corporation (a manufacturer of value-added engineered materials and components serving building products markets). Olin director since January 2002; Chair of the Executive Committee. Mr. Rupp’s extensive history at Olin, together with his board service at other companies, provides him with in-depth knowledge of Olin’s business and the industry.

PHILIP J. SCHULZ, 71, was Managing Partner of PricewaterhouseCoopers (a registered public accounting firm) Hartford, Connecticut office until his retirement in July 2003. Mr. Schulz also served as the Hartford office leader of PwC’s Consumer & Industrial Products & Services industry group. He joined Coopers & Lybrand in 1967 and was Managing Partner of the Hartford office at the time of the merger of Coopers & Lybrand and Price Waterhouse in 1998. He was a member of the Firm Council and was a trustee of the PwC Foundation. He also served as a regional technical consultant and SEC reviewer and was assigned to the firm’s national office for two years. The Olin Board has determined that Mr. Schulz qualifies as an “audit committee financial expert” for Olin under applicable SEC rules. Mr. Schulz earned a bachelor’s degree in accounting from Niagara University and also completed the Tuck Executive Program at Dartmouth College. He is on the board of directors of Interim HealthCare of Hartford, Inc. Mr. Schulz is also trustee emeritus of the University of St. Joseph; a director of St. Francis Hospital; a director of the Lake Sunapee Protective Association and is on the board of trustees of The McLean Fund. Olin director since July 2003; Chair of the Audit Committee and a member of the Directors and Corporate Governance Committee and the Executive Committee. Mr. Schulz’s public accounting background provides him with invaluable financial and accounting expertise.

VINCENT J. SMITH, 66, served as President and Chief Executive Officer of Dow Chemical Canada, a subsidiary of TDCC from 2001 until his retirement in 2004. From 1972 to 2000, he held positions of increasing responsibility in engineering, manufacturing and management, including the position of Business Director for TDCC’s global chlor alkali assets. Mr. Smith earned a bachelor’s degree in chemical engineering from McMaster University. Olin director since August 2008; member of the Compensation Committee and the Directors and Corporate Governance Committee. Mr. Smith’s executive service has provided him with valuable international and manufacturing experience, together with extensive knowledge of the Chlor Alkali industry.

The Olin Board has determined that all of its members, except Mr. Rupp, constituting a majority, satisfy the listing standards for independence of the NYSE and Rule 10A-3 under the Exchange Act.

TDCC is in the process of identifying the individuals whom it will designate for appointment to the Olin Board upon the consummation of the Merger, and details regarding these individuals will be provided when available.

 

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Executive Officers

The executive officers of Olin immediately prior to the consummation of the Merger are expected to be the executive officers of Olin immediately following the consummation of the Merger. Listed below is the biographical information for each person who is currently an executive officer of Olin:

JOSEPH D. RUPP, 65, is Chairman and Chief Executive Officer of Olin. He has served as Chairman of Olin since July 2005 and held the positions of President from January 2002 until May 2014 and Chief Executive Officer since January 2002. Prior to that and since March 2001, he was Executive Vice President, Operations, and was responsible for all Olin business operations including the former Brass Division (which became part of the former Metals Group in 2002), Winchester and Chlor Alkali Products. He joined Olin’s Brass Division in 1972 and held a number of positions of increasing responsibility in the Brass Division manufacturing and engineering organization. In 1985, he was appointed Vice President, Manufacturing and Engineering. He was appointed President of Olin Brass and a Corporate Vice President in 1996. He holds a bachelor’s degree in metallurgical engineering from the University of Missouri, Rolla. Mr. Rupp serves on the board of directors of Quanex Building Products Corporation (a manufacturer of value-added engineered materials and components serving building products markets). Olin director since January 2002; Chair of the Executive Committee. Mr. Rupp’s extensive history at Olin, together with his board service at other companies, provides him with in-depth knowledge of Olin’s business and the industry.

TODD A. SLATER, 51, has served as Vice President and Chief Financial Officer of Olin since May 4, 2014. Before then, he had served as Vice President, Finance and Controller since October 2010, Controller from May 27, 2005 until October 2010, Operations Controller from April 2004 until May 2005, and Vice President and Financial Officer for Olin’s Metals Group from January 2003 until April 2004. Prior to 2003, Mr. Slater served as Vice President, Chief Financial Officer and Secretary for Chase Industries Inc. (which was merged into Olin on September 27, 2002).

JOHN E. FISCHER, 60, has served as President and Chief Operating Officer of Olin since May 4, 2014. Before then, he served as Senior Vice President and Chief Financial Officer since October 2010, Vice President and Chief Financial Officer from May 27, 2005 until October 2010, Vice President, Finance and Controller from June 24, 2004 until May 27, 2005, and Vice President, Finance from January 2, 2004, when he re-joined Olin, until June 24, 2004. Prior to 2004, from 1997-2001, Mr. Fischer served as Vice President and Chief Financial Officer of Primex Technologies, Inc. During 2002 and 2003, Mr. Fischer did independent consulting for several companies including Olin.

JOHN L. MCINTOSH, 61, has served as Senior Vice President, Chemicals, of Olin since May 4, 2014. Before then, he served as Senior Vice President, Operations, since 2011, Senior Vice President, Chemicals from October 2010 until January 2011, Vice President and President, Chlor Alkali Products Division, from 1999 until 2010, Vice President Operations and Specialty Chemicals from 1998 until 1999, and in a variety of management positions within Olin’s chemicals and Chlor Alkali Products businesses prior to that time since he joined Olin in 1997.

GEORGE H. PAIN, 64, has served as Senior Vice President, General Counsel and Secretary of Olin since October 2010. Before then, he served as Vice President, General Counsel, and Secretary since April 15, 2002, when he re-joined Olin. Prior to that, since 2001, he served as Vice President and General Counsel of General Dynamics Ordnance and Tactical Systems, Inc., an operating unit of General Dynamics Corporation, a manufacturer of mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation. From 1997-2001, he served as Vice President, General Counsel and Secretary of Primex Technologies, Inc.

FRANK W. CHIRUMBOLE, 57, has served as Vice President and President, Chlor Alkali Products, of Olin since April 28, 2012. Before then, he served as President, Chlor Alkali Products, since October 2010, as Vice President, General Manager—Bleach from 2009 until September 2010, as Vice President, Supply Chain Management from 2007 to 2009, and as Vice President, Manufacturing and Engineering, from 2001 to 2007.

 

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SCOTT R. ABEL, 51, has served as Vice President and President, Chemical Distribution, of Olin since April 23, 2015. He joined Olin in April 2014 and served as President, K.A. Steel Chemicals Inc. from August 22, 2014 until April 22, 2015. From 2012 to 2014, he served as Commercial Vice President at KOST USA, Inc. and from 2009 to 2012, he served as Business Director—Glycols at Archer Daniels Midland Company. From 2008 to 2009, he served as Global Marketing Director—Acrylic Monomers; from 2003 to 2007, he served as Senior Marketing Manager—Chlor Alkali; and from 1989 through 2007, he served in various sales and marketing positions, all at TDCC.

THOMAS J. O’KEEFE, 57, has served as Vice President and President, Winchester, of Olin since April 26, 2012. From 2010 to 2011, he served as President, Winchester; from 2008 to 2010, he served as Vice President, Operations and Planning and from 2006 to 2008 he was Vice President, Manufacturing Operations, in each case, in the Winchester Division. From 2001 to 2006, he was Vice President, Manufacturing and Engineering for Olin’s former Brass Division.

RANDEE N. SUMNER, 41, has served as Vice President and Controller of Olin since May 4, 2014. From December 2012 until April 2014, she served as Division Financial Officer for Chemical Distribution. From 2010 until December 2012, she served as Assistant Controller; from 2008 to 2010, she served as Director, Corporate Accounting and Financial Reporting; and from 2006 to 2008, she served as Manager, Corporate Accounting and Financial Reporting, all for Olin Corporation.

DOLORES J. ENNICO, 63, has served as Vice President, Human Resources, of Olin since May 1, 2009. Prior to that time and since October 2005, she served as Corporate Vice President, Human Resources. From March 2004 to September 2005, she served as Vice President, Administration for Olin’s Winchester Division and former Metals group.

STEPHEN C. CURLEY, 63, has served as Vice President and Treasurer of Olin since January 1, 2005. Before then, he had served as Chief Tax Counsel of Olin since re-joining Olin on August 18, 2003. Prior to that time, he served as Vice President and Treasurer of Primex Technologies, Inc., a manufacturer and provider of ordnance and aerospace products and services, which was spun off from Olin in 1996.

G. BRUCE GREER, JR., 54, has served as Vice President, Strategic Planning and Information Technology since 2010. Before then, he served as Vice President, Strategic Planning from May 2005, when he joined Olin, until 2010. Prior to joining Olin and since 1997, Mr. Greer was employed by Solutia, Inc., an applied chemicals company. From 2003 to April 2005, he served as President of Pharma Services, a Division of Solutia and Chairman of Flexsys, an international rubber chemicals company which was a joint venture partially owned by Solutia and Akzo Nobel. Prior to that, Mr. Greer served as a Vice President of Corporate Development, Technology, and Information Technology for Solutia.

 

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INFORMATION ON TDCC

TDCC was incorporated in 1947 under Delaware law and is the successor to a Michigan corporation, of the same name, organized in 1897. TDCC’s principal executive offices are located at 2030 Dow Center, Midland, Michigan 48674.

In 2014, TDCC had annual sales of more than $58 billion and employed approximately 53,000 people worldwide. TDCC’s more than 6,000 product families are manufactured at 201 sites in 35 countries across the globe. TDCC conducts its worldwide operations through global businesses, which are reported in five operating segments: Agricultural Sciences, Consumer Solutions, Infrastructure Solutions, Performance Materials & Chemicals and Performance Plastics. TDCC’s internet address is www.dow.com. TDCC’s website and its contents are not deemed incorporated by reference in or a part of this document.

Agricultural Sciences

The Agricultural Sciences segment is a global leader in providing crop protection and seed/plant biotechnology products and technologies, urban pest management solutions and healthy oils. The business invents, develops, manufactures and markets products for use in agricultural, industrial and commercial pest management, and food service. The segment has broad global reach with sales in 135 countries and research and development (“R&D”) and manufacturing facilities located in all geographic areas. Growth is achieved through the development of innovative new products and technologies, successful segmentation of market offerings with leading brands, diverse channels to market, competitive cost positions, strategic bolt-on acquisitions, and commercial and R&D collaborations. TDCC is committed to the development of innovative new crop protection and biological products and technologies.

Consumer Solutions

The Consumer Solutions segment consists of three global businesses: Consumer Care, Dow Automotive Systems and Dow Electronic Materials. These global businesses develop and market customized materials using advanced technology and unique chemistries for specialty applications—including semiconductors and organic light-emitting diodes, adhesives and foams used by the transportation industry, and cellulosics for innovative pharmaceutical formulations and food solutions. These businesses serve the needs of market segments as diverse as: automotive; electronics and entertainment; healthcare and medical; and personal and home care goods. The segment’s commitment to continuous innovation and rapid new product development enables it to maximize opportunities in emerging geographies and high-growth industries.

Infrastructure Solutions

The Infrastructure Solutions segment is comprised of an industry-leading portfolio of businesses utilizing advanced technology to deliver products such as architectural and industrial coating applications, building insulation, adhesives, microbial protection for the oil and gas industry, and water technologies. With unmatched R&D capabilities, a broad range of chemistries, extensive geographic reach and strong channels to market, this segment is well positioned to capitalize on market trends. The segment has broad geographic reach, with sales in 145 countries and R&D and manufacturing facilities located in key geographic areas.

Performance Materials & Chemicals

The Performance Materials & Chemicals segment is comprised of five technology-driven, customer-centric global businesses that are advantaged through integration and driven by innovative technology and solutions: Chlor-Alkali and Vinyl, Chlorinated Organics, Epoxy, Industrial Solutions and Polyurethanes. Products produced by this segment are back-integrated into feedstocks, supporting a low-cost manufacturing base and consistent, reliable supply. The Performance Materials & Chemicals segment is positioned for growth through diverse

 

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markets and product offerings. The segment has broad geographic reach, with sales in nearly 150 countries and manufacturing facilities located in all geographic areas. Performance Materials & Chemicals has a diverse product line that serves customers in a large number of industries including appliance, construction and industrial.

Performance Plastics

The Performance Plastics segment is the world’s leading plastics franchise, and is a market-oriented portfolio composed of five global businesses: Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons. The segment is advantaged through its low-cost position into key feedstocks and broad geographic reach, with sales in more than 110 countries and manufacturing facilities located in all geographic areas. It also benefits from TDCC’s R&D expertise to deliver leading-edge technology that provides a competitive benefit to customers in key strategic markets.

For a more detailed description of TDCC’s business, see TDCC’s Annual Report on Form 10-K for the year ended December 31, 2014, which has been filed with the SEC and is incorporated by reference into this document. See “Where You Can Find More Information; Incorporation by Reference.”

Directors and Officers of TDCC

All directors and officers of TDCC listed below are citizens of the United States unless otherwise disclosed. None of the directors and officers of TDCC listed below have been convicted in a criminal proceeding during the past five years. None of the directors and officers of TDCC listed below were a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or of a finding of any violation of federal or state securities laws. The business address of each director and officer of TDCC is 2030 Dow Center, Midland, Michigan, 48674.

Set forth below is information related to TDCC’s directors as of August 25, 2015.

Ajay Banga, 55. President and Chief Executive Officer, MasterCard Incorporated. Director since 2013.

MasterCard Incorporated (a technology company in the global payments industry) — President and Chief Executive Officer, July 2010 to date; Board Member, April 2010 to date; President and Chief Operating Officer of MasterCard Incorporated and MasterCard International Incorporated, August 2009-July 2010. Citigroup (a provider of financial services) — Chief Executive Officer of Citigroup Asia Pacific region, March 2008-August 2009. Previous positions from 1996 to 2009 included Chairman and Chief Executive Officer of Citigroup’s International Global Consumer Group, Executive Vice President of Citigroup’s Global Consumer Group, President of Citigroup’s Retail Banking North America, business head for CitiFinancial and the U.S. Consumer Assets Division and division executive for the consumer bank in Central/Eastern Europe, Middle East, Africa, and India. PepsiCo (a worldwide food and beverage company) — 1994-1996. Nestlé (a worldwide food company) — 1981-1994. Chairman of the U.S.-India Business Council. Vice Chairman of the Business Council. Member of the Executive Committee of the Business Roundtable. Member of the International Business Committee of the World Economic Forum, the Council on Foreign Relations, Weill Cornell Medical College Board of Overseers and The Economic Club of New York. Board member of The Financial Services Roundtable, The American Red Cross and the New York City Ballet. Fellow of the Foreign Policy Association and was awarded the Foreign Policy Association Medal in 2012. Director of MasterCard Incorporated. Former director of Kraft Foods Group, Inc. (2007-2012).

 

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Jacqueline K. Barton, 63. Arthur and Marian Hanisch Memorial Professor of Chemistry, Chair, Division of Chemistry and Chemical Engineering, California Institute of Technology. Director since 1993.

California Institute of Technology — Professor of Chemistry 1989 to date, Arthur and Marian Hanisch Memorial Professor of Chemistry 1997 to date. Chair, Division of Chemistry and Chemical Engineering, 2009 to date. Assistant Professor of Chemistry and Biochemistry, Hunter College, City University of New York 1980-1982. Columbia University — Assistant Professor 1983-1985, Associate Professor 1985-1986, Professor of Chemistry and Biological Sciences 1986-1989. Recipient of the 2010 National Medal of Science, the highest honor bestowed by the United States government on scientists, and the 2015 Priestley Medal, the highest honor bestowed by the American Chemical Society. Named a MacArthur Foundation Fellow 1991, the American Academy of Arts and Sciences Fellow 1991, the American Philosophical Society Fellow 2000, National Academy of Sciences member 2002 and Institute of Medicine member 2012. Named Outstanding Director 2006 by the Outstanding Director Exchange (ODX); 2013 Director of the Year Award, Forum for Corporate Directors. 2014 American Chemical Society Fellow.

James A. Bell, 67. Former Executive Vice President, Corporate President and Chief Financial Officer, The Boeing Company. Director since 2005.

The Boeing Company (an aerospace company and manufacturer of commercial jetliners and military aircraft) — Executive Vice President, Corporate President and Chief Financial Officer, 2008 to 2012; Executive Vice President, Finance and Chief Financial Officer 2003-2008; Senior Vice President of Finance and Corporate Controller 2000-2003. Previous positions include Vice President of Contracts and Pricing for Boeing Space and Communications 1996-2000; Director of Business Management of the Space Station Electric Power System at Boeing Rocketdyne unit 1992-1996. Director of J.P. Morgan Chase & Co., CDW Corporation and the Chicago Infrastructure Trust.

Richard K. Davis, 57. Chairman, President and Chief Executive Officer, U.S. Bancorp. Director since 2015.

U.S. Bancorp (a financial services holding company) — Chairman 2007 to date; Chief Executive Officer 2006 to date; President 2004 to date. Various management positions at U.S. Bancorp since joining StarBanc Corporation, one of its predecessors, in 1993 as Executive Vice President. Director of Xcel Energy.

Jeff M. Fettig, 58. Chairman and Chief Executive Officer of Whirlpool Corporation. Director since 2003. Lead Director since 2011.

Whirlpool Corporation (a manufacturer of home appliances) — Chairman and Chief Executive Officer 2004 to date; President and Chief Operating Officer 1999-2004; Executive Vice President 1994-1999; President, Whirlpool Europe and Asia 1994-1999; Vice President, Group Marketing and Sales, North American Appliance Group 1992-1994; Vice President, Marketing, Philips Whirlpool Appliance Group of Whirlpool Europe B.V. 1990-1992; Vice President, Marketing, KitchenAid Appliance Group 1989-1990; Director, Product Development 1988-1989. Director of the Indiana University Foundation. Member of the National Board of Governors for the Boys & Girls Club. Director of Whirlpool Corporation.

Andrew N. Liveris, 61. TDCC President, Chief Executive Officer and Chairman. Director since 2004.

Employee of TDCC since 1976. President and Chief Operating Officer 2003-2004. President and Chief Executive Officer 2004 to date and Chairman 2006 to date. Vice Chairman of the Business Roundtable; Executive Committee Member and past Chairman of the U.S. Business Council; Past Chairman of the U.S.-China Business Council, American Chemistry Council, The International Council of Chemical Associations and the President’s Advanced Manufacturing Partnership. Member of the President’s Export Council, the American Australian Association and the Peterson Institute for International Economics. Member of the Board of Trustees of The Herbert H. and Grace A. Dow Foundation, the California Institute of Technology and the United States Council for International Business. Director of International Business Machines Corporation. Former director of Citigroup, Inc. (2005-2011). Mr. Liveris is a citizen of Australia.

 

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Mark Loughridge, 61. Former Chief Financial Officer of International Business Machines. Director since 2015.

International Business Machines Corporation (a manufacturer of computer hardware and software and IT consulting services) — Chief Financial Officer May 2004-December 2013. Member of the Council on Chicago Booth. Director of The Vanguard Group.

Raymond J. Milchovich, 65. Lead Director of Nucor Corporation and Former Chairman and Chief Executive Officer of Foster Wheeler AG. Director since 2015.

Nucor Corporation (a producer of steel and iron) — Director 2002-2007 and 2012-current; Lead director September 2013 to date. Foster Wheeler AG (a company that engineers and constructs facilities for oil and gas, liquid natural gas, refining, chemical, pharmaceutical and power industries) — Non-executive Chairman of the Board and Consultant 2010 to November 2011; Chairman and Chief Executive Officer 2007-2010; Chairman, President and Chief Executive Officer 2001-2007. Delphi Corporation (a manufacturer of automotive electronics, systems, modules and components) — Director 2005-2009. Director of Nucor Corporation. Former director of Foster Wheeler AG (2001-2011).

Robert S. Miller, 73. President and Chief Executive Officer, International Automotive Components (IAC) Group. Director since 2015.

International Automotive Components (IAC) Group (a leading global supplier of automotive components and systems) — President and Chief Executive Officer August 2015 to date. American International Group Inc. (a provider of insurance and financial services) — Non-Executive Chairman of the Board May 2009 to August 2015. Hawker Beechcraft, Inc. (a manufacturer of aircraft) — Chief Executive Officer February 2012 to February 2013. Delphi Corporation (a manufacturer of automotive electronics, systems, modules and components) — Executive Chairman 2007-2009; Chairman and Chief Executive Officer July 2005-January 2007. Director of International Automotive Components (IAC) Group, American International Group, Inc. and Symantec Corporation. Former director of Hawker Beechcraft, Inc. (2012-2013), and UAL Corporation (United Airlines) (2003-2010). Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc. when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in May 2012.

Paul Polman, 59. Chief Executive Officer of Unilever PLC and Unilever N.V. Director since 2010.

Unilever PLC and Unilever N.V. (a provider of nutrition, hygiene and personal care products) — Chief Executive Officer January 2009 to date. Nestlé S.A. (a worldwide food company) — Executive Vice President of Americas, January 2008 to September 2008; Chief Financial Officer 2006-2008. The Procter & Gamble Company (a provider of consumer, pharmaceutical, cleaning, personal care and pet products) — Group President Europe 2001-2006. CFO of the Year 2007, Investor Magazine; Carl Lindner Award 2006, University of Cincinnati; WSJ/CNBC European Business Leader of the Year 2003. Member of United Nations high level task force on post 2015 development goals. President of the Kilimanjaro Blindtrust/Chair of Perkins International Advisory Board. Board member of Global Consumer Goods Forum. Member: International Business Council of WEF, Swiss American Chamber of Commerce and vice chair of the World Business Council for Sustainable Development. Member of the B-Team (a global initiative to help transform the future of business). Honorary degrees from University of Northumbria, UK in 2000 and University of Cincinnati in 2009. Director of Unilever PLC and Unilever N.V. Mr. Polman is a citizen of the Netherlands.

Dennis H. Reilley, 62. Non-Executive Chairman of Marathon Oil Corporation. Director since 2007.

Marathon Oil Corporation (an oil and natural gas exploration and production company) — Non-Executive Chairman, January 2014 to date; Board member 2002 to date. Covidien public limited company (a provider of healthcare products) — Non-Executive Chairman, 2007-2008; Board member, 2007 to January 2015. Praxair, Inc. (a provider of gases and coatings) — Chairman 2000-2007; President and Chief Executive Officer 2000-2006. E.I. du Pont de Nemours & Co. — Executive Vice President and Chief Operating Officer 1999-2000; Executive Vice President 1997-1999; Vice President and general manager, Lycra business 1996-1997; Vice President and general manager, specialty chemicals business 1994-1995; Vice President and general manager, titanium dioxide business 1990-1994. Prior to 1989, held various senior executive positions with Conoco. Former Director of the Conservation Fund. Former Chairman of the

 

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American Chemistry Council. Trian Advisory Partners — Member, 2015 to date. Director of Marathon Oil Corporation. Former director of Covidien public limited company (2007 to January 2015) and H.J. Heinz Company (2005-2013).

James M. Ringler, 70. Chairman of Teradata Corporation. Director since 2001.

Teradata Corporation (a provider of database software, data warehousing and analytics) — Chairman, October 2007 to date. NCR Corporation (a producer of automated teller machines and point of sale devices) — Director and Chairman 2005-2007. Illinois Tool Works, Inc. — (following its merger with Premark International, Inc.), Vice Chairman 1999-2004. Premark International, Inc. — Chairman 1997-1999; Director 1990-1999; Chief Executive Officer 1996-1999; President and Chief Operating Officer 1992-1996; Executive Vice President 1990-1992. Tappan Company — President and Chief Operating Officer 1982-1986; White Consolidated Industries’ Major Appliance Group — President 1986-1990 (both subsidiaries of Electrolux AB). Director of Teradata Corporation, Autoliv Inc., John Bean Technologies Corporation and FMC Technologies, Inc. (John Bean Technologies Corporation was spun-off from FMC Technologies, Inc. in 2008.) Former director of Ingredion Incorporated (2001-2014).

Ruth G. Shaw, 67. Former Group Executive for Public Policy and President of Duke Nuclear. Director since 2005.

Duke Energy Corporation (a provider of electricity and natural gas) — Executive Advisor, October 2006 to May 2008; Group Executive, Public Policy and President, Duke Nuclear, April 2006 to October 2006; President and Chief Executive Officer, Duke Power Company 2003-2006; Executive Vice President and Chief Administrative Officer 1997-2003; President of The Duke Energy Foundation 1994-2003; Senior Vice President, Corporate Resources 1994-1997; Vice President, Corporate Communications 1992-1994. President, Central Piedmont Community College, Charlotte, NC 1986-1992. President, El Centro College, Dallas, TX 1984-1986. Foundation Board of Trustees for the University of North Carolina at Charlotte: Carolina Thread Trail Governing Board. Director, Foundation for the Carolinas. Director of DTE Energy Company.

 

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Set forth below is information related to TDCC’s executive officers as of August 25, 2015.

 

Name- Age

  

Present Position with
Registrant

  

Year
Elected to
be an
Officer

  

Other Business Experience since January 1, 2010

Ronald C. Edmonds, 58    Vice President and Controller    2009    Vice President and Controller 2009 to date.
James R. Fitterling, 53    Vice Chairman, Business Operations    2010    Vice President Corporate Development 2009 to August 2010. Dow Executive Vice President and President, Plastics and Hydrocarbons August 2010 to September 2011. Executive Vice President and President, Feedstocks & Energy and Corporate Development September 2011 to September 2012. Executive Vice President, Feedstocks, Performance Plastics, Asia and Latin America September 2012 to December 2013. Executive Vice President, Feedstocks, Performance Plastics and Supply Chain December 2013 to October 2014. Present position held since October 2014.
Heinz Haller, 60    Executive Vice President and President of Dow Europe, Middle East, Africa and India    2006    Executive Vice President, Performance Systems May 2009 to August 2010. Executive Vice President and Chief Commercial Officer August 2010 to September 2012. Present position held since September 2012. Mr. Haller is a citizen of Switzerland.
Joe E. Harlan, 56    Chief Commercial Officer and Vice Chairman, Market Businesses    2011    Executive Vice President of Consumer & Office Business, 3M Company 2009 to August 2011. Executive Vice President, Performance Materials September 2011 to September 2012. Executive Vice President, Chemicals, Energy and Performance Materials September 2012 to October 2014. Present position held since October 2014.
Peter Holicki, 55    Corporate Vice President, Manufacturing and Engineering, and Environment, Health & Safety Operations    2014    Global Manufacturing Vice President, Hydrocarbons May 2009 to October 2012. Vice President for Manufacturing and Engineering Europe, Middle East and Africa May 2009 to October 2012. Vice President of Operations for Europe, Middle East and Africa and the Ethylene Envelope October 2012 to December 2013. Emergency Services and Security Expertise September 2014 to present. Present position held since 2014. Mr. Holicki is a citizen of Germany.
Charles J. Kalil, 64    General Counsel and Executive Vice President    2004    General Counsel 2004 to date. Executive Vice President 2008 to date. Corporate Secretary 2005 to January 2015.
Andrew N. Liveris, 61    President, Chief Executive Officer and Chairman of the Board    2003    President and Chief Executive Officer 2004 to date and Chairman 2006 to date. Mr. Liveris is a citizen of Australia.

 

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Name- Age

  

Present Position with
Registrant

  

Year
Elected to
be an
Officer

  

Other Business Experience since January 1, 2010

Fernando Ruiz, 59    Corporate Vice President and Treasurer    2001    Corporate Vice President and Treasurer 2001 to date.
Johanna Söderström, 44    Corporate Vice President, Human Resources and Aviation    2015    HR Director, Europe, Middle East and Africa July 2009 to January 2011. Global HR Director, Performance Materials Division January 2011 to October 2012. Vice President, HR Center of Expertise October 2012 to January 2015. Present position held since January 2015. Ms. Söderström is a citizen of Finland.
A. N. Sreeram, 47    Corporate Vice President, Research & Development    2013    Vice President, Research & Development, Dow Advanced Materials 2009 to October 2013. Present position held since October 2013.
Howard I. Ungerleider, 46    Chief Financial Officer and Executive Vice President    2011    Vice President, Investor Relations 2008 to March 2011. Senior Vice President and President, Performance Plastics March 2011 to September 2012. Executive Vice President, Advanced Materials September 2012 to October 2014. Present position held since October 2014.

 

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INFORMATION ON THE DOW CHLORINE PRODUCTS BUSINESS

General

DCP is a leading vertically-integrated producer of sodium hydroxide (caustic soda) and chlorine (together, chlor-alkali) and derivatives. DCP operates three businesses: Chlor-Alkali and Vinyl (“CAV”), Global Epoxy (“Epoxy”) and Global Chlorinated Organics (“GCO”). These businesses benefit from access to key natural resources including water, brine and natural gas and production facilities in the U.S. Gulf Coast. DCP leverages its production economics through sales of caustic soda, chlorine, and a broad spectrum of downstream chlorine derivatives and epoxy products for a variety of end uses in global markets.

In the Transactions, TDCC will transfer certain assets and liabilities related to DCP, directly or indirectly, to Splitco, which is a newly formed, wholly-owned subsidiary of TDCC that was organized specifically for the purpose of effecting the Separation. In exchange, TDCC will receive additional shares of common stock of Splitco, the Special Payment and the Splitco Securities (or cash in the amount of the Above Basis Amount if TDCC elects to receive a cash dividend from Splitco in lieu of the Splitco Securities). Splitco has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Transactions. See “The Transactions.”

Products

Chlor-Alkali and Vinyl. DCP’s CAV business segment has the largest chlor-alkali capacity in North America and globally. With access to U.S. Gulf Coast natural gas, integrated power, low-cost brine mining and in-house maintenance, DCP’s CAV business sells its products into a broad range of end-use applications including pulp and paper, alumina, urethanes, chlorine derivatives and epoxy products. CAV serves as the foundation of the overall DCP business, providing a low-cost source of chlorine and caustic soda for high-value derivative products sold into merchant markets and through long-term supply relationships, as well as through its GCO and Epoxy businesses.

CAV is one of the largest global marketers of caustic soda with access to internally produced caustic soda in the U.S. Gulf Coast, re-marketing of material produced by other parties including the JV Entity, and off-take material produced by TDCC in Brazil. The off-take arrangement with TDCC in Brazil entitles DCP to 100 percent ownership of the caustic soda produced at TDCC’s Aratu, Brazil site, which DCP sells into the South American market. This allows DCP to leverage relationships with alumina, pulp and paper and chemical companies in multiple locations.

CAV is also one of the largest global marketers of ethylene dichloride (“EDC”) and vinyl chloride monomer (“VCM”). EDC and VCM sales provide key access into housing construction markets in both North America and globally. These products facilitate higher asset utilization, hydrochloric acid (“HCL”) management at DCP’s integrated production sites and incremental caustic soda sales.

Global Epoxy. DCP’s Epoxy business segment is one of the largest integrated global producers of epoxy resins, curing agents and intermediates. Epoxy serves a diverse array of applications, including electrical laminates, marine coatings, consumer goods and composites, as well as numerous applications in civil engineering and infrastructure products. DCP has a favorable manufacturing cost position in epoxy materials which is driven by a combination of scale and integration into low-cost feedstocks (including chlorine, caustic, allylics and aromatics).

Epoxy is an integrated epoxy producer with upstream, midstream and downstream epoxy products. Epoxy produces and sells a full range of epoxy materials, including upstream products such as allyl chloride (“Allyl”) and epichlorohydrin (“EPI”), midstream products such as liquid epoxy resins (“LER”) and downstream products such as converted epoxy resins (“CER”) and additives. DCP leverages its economies of scale at each stage of the

 

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epoxy value chain by selling both to the market as well as supplying internal downstream derivative epoxy needs. DCP Epoxy production economics benefits from its integration into chlor-alkali and aromatics which are key inputs in epoxy production. The Epoxy business segment’s consumption of chlorine allows DCP’s CAV business to enable caustic soda sales as well as utilize Epoxy’s production of byproduct HCL across different DCP manufacturing processes.

Allyl has widespread use, not only as feedstock in the production of DCP Epoxy’s Epi, but also as a chemical intermediate in multiple industries and applications, including water purification chemicals. Similarly, DCP produces Epi, primarily as a feedstock for use in its own epoxy resins, but also as a merchant marketer of Epi to epoxy producers globally who produce their own resins for end use segments such as coatings and electronic materials. LER is manufactured in liquid form and cures with the addition of a hardener into a thermoset solid material offering a distinct combination of strength, adhesion and chemical resistance that is well-suited to coatings and composites applications. While DCP sells its LER externally, a large share of LER production is further converted by DCP into CER where value-added modifications produce higher margin customer-specific resins.

DCP also operates an integrated aromatics production chain producing cumene, phenol, acetone and bisphenol (“BisA”) for internal consumption and sale.

Global Chlorinated Organics. GCO is one of the largest global producers of chlorinated organic products, including chloromethanes (methyl chloride, methylene chloride, chloroform and carbon tetrachloride), and chloroethenes (perchloroethylene, trichloroethylene, and vinylidene chloride). GCO participates in both the “solvent” and the “intermediate” segments of the global chlorocarbon industry with a focus on sustainable applications and in markets where it can benefit from its cost and technology advantages. GCO’s products are sold as intermediates that are used as feedstocks in the production of fluoropolymers, fluorocarbon refrigerants and blowing agents, silicones, cellulosics, and agricultural chemicals. Solvent products are sold into end uses such as surface preparation, dry cleaning, pharmaceuticals and regeneration of refining catalysts.

GCO’s manufacturing facilities consume chlorine produced by the CAV business, which enables caustic soda sales. GCO’s production technology also allows it to recycle byproduct streams from other DCP and TDCC businesses, which are used as raw materials by GCO. Through its recycling technology, GCO is able to transform byproduct streams into high-value-added products while simultaneously avoiding otherwise costly incineration costs. The business is often compensated to utilize these byproduct streams, generating negative cost inputs.

Manufacturing and Facilities

Chlor-Alkali and Vinyl. DCP’s CAV business segment is comprised of facilities in Freeport, Texas and Plaquemine, Louisiana. Both are strategically located in areas close to brine mining and low-cost power and steam cogeneration. The CAV operations are also supported by in-house production technology which includes chlorine cell production, repair and maintenance services based in DCP’s facility in Russellville, Arkansas.

DCP’s Freeport CAV assets are situated within TDCC’s Texas operations site, the hub and original location of TDCC’s U.S. Gulf Coast presence since the 1940s. The DCP CAV assets at the Freeport complex consist of four chlor-alkali facilities, including TDCC’s share of the JV Entity described below, one caustic soda evaporator, five EDC facilities and one VCM facility. The JV Entity is a 50:50 manufacturing joint venture between TDCC and JV Partner that owns the world’s largest grassroots chlor-alkali membrane facility, which began production in the first quarter of 2014.

DCP’s Plaquemine CAV assets are situated within TDCC’s 1,500 acre petrochemical facility in that location and consist of one chlor-alkali facility, one caustic soda evaporator and one EDC facility.

 

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Both sites also include supporting assets and storage facilities associated with the CAV business as well as the brine mining operations at Stratton Ridge near Freeport, and Grand Bayou near Plaquemine, and onsite cell repair and maintenance operations. The Freeport assets also include two dedicated natural gas power cogeneration plants and the onsite chlorinated hydrocarbon byproduct (“RCL/HCL”) (chlor-alkali byproduct) management system.

The Russellville site is a fabricator and parts distributor to DCP and TDCC chlor-alkali sites, including DCP’s Freeport and Plaquemine facilities and TDCC’s sites in Germany and Brazil. It also manufactures cathodes and anodes used in ECU production, assembles and regaskets chlor-alkali production cells, and handles logistics for parts repair. Russellville covers global cell services for both membrane and diaphragm chlor-alkali technologies and assembles membrane cells for DCP from parts supplied by a third-party using a DCP design.

Global Epoxy. DCP has a global manufacturing footprint for its Epoxy business. Allyl and Epi are produced at facilities at Freeport, Texas and at Stade, Germany. LER is produced at Freeport and Stade as well as at a facility in Guaruja, Brazil. Downstream CER products are produced in North America at Freeport and Roberta, Georgia; in Europe at Stade, Germany, Rheinmunster, Germany, Baltringen, Germany and Pisticci, Italy; in Asia at Zhangjiagang, China and Gumi, South Korea; and in South America at Guaruja, Brazil. Epoxy also produces Phenol, Acetone and BisA at Freeport, BisA at Stade, and Cumene at Terneuzen, Netherlands to provide key aromatics inputs for the Epoxy business.

Global Chlorinated Organics. DCP’s GCO business segment operates three integrated manufacturing facilities at the Freeport, Plaquemine and Stade sites. Chloromethanes products are produced at Freeport, Texas and Stade, Germany. Perchloroethylene is produced at Plaquemine, Louisiana and Stade, Germany. Trichloroethylene is produced at Freeport, Texas and Stade, Germany. VDC is produced only at Freeport, Texas. At all three sites, GCO plays an important role in RCL/HCL production, consumption and system management.

Sales and Distribution

Sales and marketing of CAV products is focused on merchant caustic soda, chlorine and EDC sales. DCP currently only sells chlorine through long-term supply agreements with TDCC primarily by pipeline or rail in North America. Caustic soda is sold under one to three-year contracts from the U.S. Gulf Coast and Brazil to a wide array of customers mainly in the United States, Canada and Latin America. The CAV business serves a broad range of applications with significant participation in the pulp and paper, alumina, water treatment and chemical industries. Most of CAV’s EDC production is converted into VCM and sold and transferred via pipeline to a fenceline customer that produces polyvinyl chloride (“PVC”), but CAV also participates in the merchant EDC market. Most chlorine is distributed to DCP’s downstream GCO and Epoxy businesses and sold to TDCC through DCP pipelines at Freeport and Plaquemine. Caustic soda is distributed by barge, shipped from deep water ports or transported by rail through a fleet of approximately 800 railcars.

Epoxy sells a wide range of products and has a dedicated sales force and significant logistical capabilities. Epoxy focuses on developing downstream, higher value add products, such as CER, but it also sells midstream and upstream materials to optimize utilization of production assets. Epoxy has important relationships with established merchant customers, some of which span decades. The segment’s product is delivered primarily by marine vessel, deep-water and coastal barge, railcar and truck.

GCO has dedicated sales and marketing resources in each of the major geographies, maintaining a wide array of long-standing customer relationships from long-term contracts to short-term spot arrangements. GCO accesses its geographically diverse and fragmented market through direct key customer interfaces and preferred contractual relationships with distribution and channel leaders. It maintains strong, long-term strategic relationships and its average relationship with its top ten customers exceeds 13 years. GCO uses approximately 20 terminal locations globally to transport product by marine vessel, rail and truck transportation and maintains a fleet of approximately 390 railcars in North America.

 

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Raw Materials and Energy

The primary manufacturing components for the CAV business—water, brine and electricity—are largely sourced from DCP’s supporting assets. The water and brine are provided in the form of a brine solution from DCP’s brine mining operations. Electricity and steam are supplied by DCP’s power assets and supplemented with purchases from the utility grid. DCP’s integrated power generation capabilities are gas based and the CAV business has benefited from low natural gas prices as power represents approximately 80 percent of CAV’s ECU variable production costs. The business has access to ethylene raw material through a contractual supply from TDCC.

In North America, Epoxy produces Phenol, Acetone and BisA at Freeport and purchases Cumene, as well as imports some Cumene from Terneuzen. For Allyl production, Chlorine is sourced from the CAV business in the U.S. Gulf Coast and hydrocarbons are purchased from TDCC under long-term contracts. CAV also supplies caustic soda that is a raw material for Epi production. In Europe, Epoxy produces Cumene at Terneuzen where it receives benzene and a portion of its propylene from TDCC. Cumene is then converted into phenol and acetone through a tolling arrangement and the output is used to produce BisA at Stade. Chlorine and propylene are received onsite in Stade from TDCC. LER and BisA are shipped by rail from Stade to other European sites for CER processing. In Asia, LER is shipped to Zhangjiagang and Gumi from Freeport and Stade, mostly by marine bulk transport, for use in CER production and for direct trade sales.

Key raw materials for the GCO business are chlorine and EDC from the CAV business in the U.S. Gulf Coast and chlorine from TDCC in Europe. Methanol is GCO’s most significant third-party raw material cost and is obtained through multiple contracts in Europe and North America.

Research and Development

In 2014, DCP reported research and development expense of $34 million, or less than one percent of sales. Current research and development is primarily focused in the Epoxy business, supporting niche products and applications aligned with the midstream and downstream portions of the value chain due to their profitability and future growth potential. Historically, DCP has also invested research and development expense toward process optimization and development of next-generation refrigerant feedstock technology.

Seasonality

DCP’s sales are affected by the cyclicality of the economy and the seasonality of several industries, including building and construction, coatings, infrastructure, electronics, automotive and refrigerants. The chlor-alkali industry is cyclical, both as a result of changes in demand for each of its co-products (chlorine and caustic soda) and as a result of changes in manufacturing capacity. Chlorine and caustic soda are co-products and are produced in a fixed ratio. Therefore, the production of one co-product can be constrained both by manufacturing capacity and/or by the ability to sell the co-product. Consequently, prices for both products respond rapidly to changes in supply and demand conditions in the industry. The cyclicality of the chlor-alkali industry has further impacts on downstream products in GCO and Epoxy. Pricing for GCO and Epoxy products have historically been impacted by the changing level of pricing for chlorine and, to a greater extent, caustic soda. In general, DCP’s businesses experience their highest level of activity during the spring and summer months, particularly when construction, refrigerants, coatings and infrastructure activity is higher.

Competition

Competition faced by DCP varies based on the business segment. Key competitors include large, international chemical companies. DCP competes worldwide on the basis of quality, technology and price.

DCP currently competes with a range of major domestic and international producers. CAV’s key competitors include: Axiall Corporation, Formosa Plastics Corporation, U.S.A., Occidental Chemical

 

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Corporation, Shintech, Inc. and Westlake Chemical Corporation. Epoxy competes with global participants, including Huntsman Corporation, Hexion Inc., as well as local participants with assets primarily in Asia Pacific. GCO key competitors include: Axiall Corporation, Occidental Chemical Corporation, Ineos, Akzo Nobel, Solvay and large Chinese producers such as Juhua.

Environmental Regulation

In all of the jurisdictions in which DCP operates, it is subject to environmental laws and regulations, including those related to air emissions, the discharge of waste water, and the use, handling, generation, transportation, storage and disposal of chemicals, hazardous and toxic substances and waste. Among other obligations, these laws and regulations may require DCP to apply for, obtain, comply with and periodically renew environmental permits. They may also require the installation and maintenance of pollution control equipment. In the event of any future accidental spills, leaks or other releases of hazardous or toxic substances or wastes, these laws and regulations would govern any required investigation and, if applicable, cleanup and remediation. DCP expends significant capital and operating expenses to maintain compliance with these laws and regulations. Developments such as the passage of more stringent environmental laws and regulations, or more rigorous enforcement of existing laws and regulations, could require DCP to increase the resources needed to maintain or achieve compliance.

At the two largest DCP manufacturing operations located in Freeport, Texas and Plaquemine, Louisiana, DCP operates under the terms and conditions of Title 5 permits issued pursuant to the U.S. Clean Air Act (“CAA”), as well as other applicable air permits issued under the authority of the CAA and similar state laws. Hazardous waste generation and management activities are subject to the U.S. Resource Conservation and Recovery Act (“RCRA”) and RCRA regulations, and both the Freeport, Texas and Plaquemine, Louisiana facilities hold RCRA permits. In addition, DCP manufacturing operations generate incidental polychlorinated biphenyls (“PCBs”), and the management of the PCBs is subject to permits issued under the U.S. Toxic Substances Control Act (“TSCA”).

The sale, distribution and use of DCP’s chemical products are subject to chemical registration regimes such as those created by TSCA in the United States and the Registration, Evaluation, and Restriction of Chemical regulations, commonly referred to as REACH, in the European Union. The U.S. Congress is currently considering legislation that would update and revise TSCA, although at this time it is unclear how any updates and/or revisions would impact the DCP business.

Legal Proceedings

TDCC is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which monetary damages are sought and some of which relate to or arise out of the current or past operation of DCP. These lawsuits and claims relate to, among other things, environmental, product liability and contractual matters.

The results of any current or future litigation are inherently unpredictable. However, TDCC believes that, in the aggregate, the outcome of all lawsuits and claims involving DCP will not have a material effect on DCP’s combined financial position or liquidity. TDCC has agreed in the Separation Agreement to retain the JV Entity arbitration with Samsung so that its outcome will not impact DCP. In addition, TDCC has generally agreed in the Separation Agreement to retain claims, including certain environmental and product liabilities, relating to the conduct of DCP prior to the Distribution.

Employees

DCP has approximately 2,100 employees, with the majority located at the Freeport, Plaquemine and Stade sites. Some of the employees in Freeport are represented by labor unions. Employees at locations in Europe, including employees at Stade, are represented by work councils typical for the relevant location. DCP considers its relationships with the employees, unions and work councils to be good.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS FOR THE DOW CHLORINE PRODUCTS BUSINESS

Overview

DCP is a leading vertically-integrated producer of caustic soda, chlorine and related derivatives with businesses in chlor-alkali, epoxy and chlorinated organics products. DCP produces chlorine and sodium hydroxide (“caustic soda”), which together are referred to as “electrochemical units” or “ECUs,” at its plant locations in the U.S. Gulf Coast (“USGC”), which enjoy access to shale gas as a source of power and brine as a raw material. DCP monetizes these ECUs through merchant sales of caustic soda, chlorine and a broad spectrum of integrated downstream chlorine products and associated end uses. DCP operates in three strategic business segments: Chlor-Alkali and Vinyl (“CAV”), Global Epoxy (“Epoxy”) and Global Chlorinated Organics (“GCO”).

In the Transactions, TDCC will transfer certain assets and liabilities related to DCP, directly or indirectly, to a newly formed, direct, wholly-owned subsidiary of TDCC, Splitco, that was organized specifically for the purpose of effecting the Separation. In exchange, TDCC will receive additional shares of common stock of Splitco, the Special Payment as a dividend and the Splitco Securities to be used in the Debt Exchange (or cash in the amount of the Above Basis Amount if TDCC elects to receive a cash dividend from Splitco in lieu of the Splitco Securities). See “The Transactions.” Splitco has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Transactions.

Separation of the Dow Chlorine Products Business from TDCC

On March 27, 2015, TDCC and Olin announced that they had entered into the Merger Agreement, and that TDCC and Splitco had entered into the Separation Agreement, which together provide for the combination of Olin’s business and DCP. The terms of the Transactions require TDCC, prior to the Distribution, to transfer DCP to Splitco and then distribute to TDCC shareholders all of the shares of Splitco common stock held by TDCC, through a spin-off or split-off, and then immediately merge Merger Sub with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Olin in a tax efficient Reverse Morris Trust transaction. Immediately after the completion of the Merger, approximately 52.7 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger holders of Splitco common stock and approximately 47.3 percent of the outstanding shares of Olin common stock is expected to be held by pre-Merger holders of Olin common stock. Consummation of the Transactions is subject to approval by Olin shareholders and customary closing conditions, relevant tax authority rulings and regulatory approvals.

 

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Results of Operations

 

     For the
Six Months Ended
June 30,
    For the Years ended December 31,  
         2015             2014             2014             2013             2012      
    

(in millions)

 

Net sales—external

   $ 1,549      $ 1,942      $ 3,849      $ 3,637      $ 4,044   

Net sales—related party

     336        484        927        738        718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Sales

     1,885        2,426        4,776        4,375        4,762   

Cost of sales

     1,822        2,348        4,573        4,257        4,350   

Research and development expenses

     14        17        34        51        54   

Selling, general and administrative expenses

     67        76        152        145        139   

Restructuring charges

                                 33   

Sundry expense (income)—net

     1               3        (2     1   

Interest expense

     6        6        13                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Income Taxes

     (25     (21     1        (76     185   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision (benefit) for income taxes

     1        8        8        (27     39   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss)

     (26     (29     (7     (49     146   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to noncontrolling interests

     (5     (5     (5     (4     (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss) Attributable to DCP

   $ (21   $ (24   $ (2   $ (45   $ 151   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Results of Operations—Six months ended June 30, 2015 Versus Six months ended June 30, 2014

DCP’s net sales in the first six months of 2015 were $1,885 million, down 22 percent ($541 million) compared with net sales of $2,426 million in the first six months of 2014. Net sales—external were $1,549 million, down 20 percent ($393 million) from $1,942 million in the first six months of 2014. The decline in net sales—external was driven by price decreases primarily resulting from a decline in global oil prices, reduced sales volume to a key GCO customer that experienced a prolonged, unplanned outage, and a reduction in cumene sales to a key Epoxy customer. Net sales—related party, which is comprised of sales to TDCC, were $336 million in the first six months of 2015, down 31 percent ($148 million) from $484 million in the first six months of 2014. The decrease in net sales—related party was primarily due to lower TDCC demand for acetone (sales down $119 million).

DCP’s cost of sales declined in line with net sales by 22 percent ($526 million) to $1,822 million in the first six months of 2015 compared with $2,348 million in the first six months of 2014. Cost of sales principally includes purchased raw materials, utilities, salaries and wages, maintenance expenses, environmental services (e.g., wastewater treatment, waste disposal) and depreciation and amortization. The decline in cost of sales resulted from lower production and sales volume — related to reduced demand due to planned TDCC turnarounds, reduced cumene demand from a key Epoxy customer, and the GCO customer outage — as well as lower unit costs of purchased raw materials, particularly natural gas (a key feedstock for power production), propylene and other propylene-based raw materials, benzene and methanol. These declines were partially offset by planned maintenance turnaround spending and expenses related to outages (an unplanned maintenance outage and a planned turnaround) at DCP’s VCM facility in Texas.

 

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DCP’s research and development expenses in the first six months of 2015 were $14 million, down 18 percent ($3 million) from $17 million in the first six months of 2014. The reduction in spending primarily reflects the ongoing benefit of DCP’s actions to streamline and reprioritize its R&D projects pipeline.

DCP’s selling, general and administrative expenses were $67 million in the first six months of 2015, down 12 percent ($9 million) from $76 million in the first six months of 2014. This decrease reflects disciplined expense controls across all of DCP’s business segments.

Interest expense was related to the debt financing of the JV Entity, which is a consolidated variable interest entity of DCP.

Looking ahead to the second-half of 2015, several factors may continue to have an impact on DCP’s future financial performance. Given DCP’s reliance on hydrocarbon based feedstocks and natural gas, DCP’s cost of sales and revenue are expected to move with crude oil and natural gas pricing. DCP’s results could also be periodically impacted by spending related to planned maintenance turnarounds at manufacturing facilities globally, particularly in segments with large asset footprints, such as CAV and Epoxy. DCP could also be impacted by outages at key customer facilities, including those operated by TDCC. Given ongoing soft demand conditions, DCP expects to continue disciplined expense controls in order to adjust its spending in line with industry conditions, postponing some spending initiatives into future periods as necessary.

Results of Operations—2014 Versus 2013

DCP’s net sales in 2014 were $4,776 million, up 9 percent ($401 million) compared with net sales of $4,375 million in 2013. Net sales—external was $3,849 million, up 6 percent. The increase in net sales—external was driven in large part by a substantial increase in sales of Epoxy products (down 3 percent in price and up 15 percent in volume), reflecting actions taken to recapture customer demand lost in previous periods. Net sales—related party rose 26 percent to $927 million. The increase in net sales—related party was driven by robust demand from TDCC, particularly in urethanes applications. In particular, DCP’s sales volume of chlorine to TDCC rose 14 percent compared with 2013, and caustic soda sales volume increased more than 20 percent compared with 2013.

DCP’s cost of sales rose 7 percent ($316 million) to $4,573 million in 2014. The increase in cost of sales compared with the prior year resulted from higher production and sales volume, especially in the Epoxy segment, as well as higher unit costs of purchased raw materials, particularly propylene and benzene for the Epoxy segment, and methanol for the GCO segment. Cost of sales for the CAV segment was impacted by a 20 percent increase in prices for natural gas, a key feedstock for power production, and planned maintenance turnaround activity in the U.S. Gulf Coast. DCP was able to partially offset its higher costs with targeted spending reductions, most significantly in the CAV segment, as well as actions to increase sales volumes, particularly in the Epoxy segment, which drove higher operating rates across CAV and Epoxy facilities. The planned shutdown of a diaphragm caustic facility in the U.S. (a significant steam consumer) in the first quarter of 2014 helped to lower utility costs.

DCP’s research and development expenses in 2014 were $34 million, down 33 percent ($17 million) from $51 million in 2013. The reduction in spending primarily reflects actions to streamline and reprioritize its R&D projects pipeline, as well as cost management actions in response to soft industry conditions.

DCP’s selling, general and administrative expenses were $152 million in 2014, an increase of 5 percent ($7 million) compared with 2013. This increase reflected year-over-year overhead inflation, as well as additional spending associated with management and operation of the JV Entity facility.

Interest expense in 2014 related to the debt financing of the JV Entity, which started up in early 2014. The JV Entity is a consolidated variable interest entity of DCP.

 

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Results of Operations—2013 Versus 2012

DCP’s net sales in 2013 were $4,375 million, down 8 percent ($387 million) from net sales of $4,762 million in 2012. Net sales—external was $3,637 million, down 10 percent. The decline in net sales—external was predominantly driven by broad-based volume contraction resulting from competitive pressures and soft industry fundamentals in the Epoxy segment (where external sales volume declined 11 percent). Net sales—related party increased 3 percent to $738 million primarily due to increased price.

DCP’s cost of sales in 2013 declined 2 percent ($93 million) to $4,257 million in 2013. Compared with the prior year, the decline primarily reflected reduced sales volumes resulting from weak industry fundamentals and soft end-market conditions, particularly in the Epoxy segment. Despite the decrease in costs, DCP was not able to expand its profitability year-over-year, as the impact of declining sales volumes and lower operating rates was coupled with additional costs related to planned maintenance and turnaround spending, particularly in the CAV segment.

DCP’s research and development expenses were $51 million in 2013, down 6 percent ($3 million) compared with 2012, primarily due to lower spending incurred for projects in the Epoxy segment.

DCP’s selling, general and administrative expenses were $145 million in 2013, up 4 percent ($6 million) compared with 2012, due in part to additional spending associated with the administration of the JV Entity during its construction phase.

Income Taxes

During the periods presented, DCP did not file separate tax returns, as it was included in the tax returns of TDCC entities within the respective tax jurisdictions. The income tax provision (benefit) included in the historical financial statements was calculated using a separate return basis as if DCP were a separate taxpayer.

DCP’s tax rates for the first six months of 2015 and 2014, and the annual periods 2014, 2013 and 2012 were favorably impacted by earnings in foreign locations taxed at rates less than the U.S. statutory rate, which was partially offset by dividends repatriated to the United States. The tax rates were unfavorably impacted by valuation allowances outside the United States, primarily in Brazil, Canada, China and Japan. For the annual periods, these factors resulted in an effective tax rate of 35.7 percent for 2013 and 21.2 percent for 2012; the tax rate for 2014 was not meaningful.

Segment Analysis

 

     For the
Six Months
Ended June 30,
     For the Years Ended December 31,  

Net Sales and EBITDA by Segment

   2015      2014      2014      2013     2012  
    

(in millions)

 

Segment:

             

Chlor-Alkali & Vinyl

   $ 636       $ 684       $ 1,432       $ 1,380      $ 1,470   

Global Epoxy

     1,050         1,506         2,872         2,504        2,769   

Global Chlorinated Organics

     199         236         472         491        523   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Net Sales

   $ 1,885       $ 2,426       $ 4,776       $ 4,375      $ 4,762   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Segment:

             

Chlor-Alkali & Vinyl

   $ 60       $ 83       $ 208       $ 73      $ 210   

Global Epoxy

     25         7         5         (38     77   

Global Chlorinated Organics

     6         1         22         37        57   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total EBITDA (1)

   $ 91       $ 91       $ 235       $ 72      $ 344   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

  (1)

DCP defines EBITDA as earnings (i.e., “Net Income (Loss)”) before interest, income taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure. DCP believes that this measure is meaningful to investors as a supplemental financial measure to assess the financial performance of its business. The use of non-GAAP financial measures is not intended

 

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  to replace any measures of performance determined in accordance with GAAP, and EBITDA as presented may not be comparable to similarly titled measures of other companies, limiting its usefulness as a comparative measure. As a result, this financial measure has limitations as an analytical and comparative tool, and you should not consider EBITDA in isolation, or as a substitute for DCP’s results as reported under GAAP. A reconciliation of EBITDA to “Income (Loss) Before Income Taxes” is provided below.

 

Reconciliation of EBITDA to “Income (Loss)
Before Income Taxes”
   For the Six Months Ended
June 30,
     For the Years Ended
December 31,
 
     2015      2014      2014      2013      2012  
    

(in millions)

 

EBITDA

   $ 91       $ 91       $ 235       $ 72       $ 344   

—Depreciation and amortization

     110         106         221         148         159   

—Interest expense and amortization of debt discount

     6         6         13                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) Before Income Taxes

   $ (25    $ (21    $ 1       $ (76    $ 185   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Segment Results—Six months ended June 30, 2015 Versus Six months ended June 30, 2014

CAV. Net sales in the CAV segment were $636 million in the first six months of 2015, down 7 percent ($48 million) from $684 million in the first six months of 2014. CAV’s net sales–external were $475 million in the first six months of 2015, down 10 percent ($51 million) compared with the first six months of 2014, primarily due to lower selling prices for VCM (sales down $48 million or 25 percent) and EDC (sales down $18 million or 27 percent) due to a decline in global oil prices. CAV’s net sales–related party were $161 million in the first six months of 2015, an increase of 2 percent ($3 million) compared with the first six months of 2014. This was primarily due to strong TDCC demand in the second quarter of 2015, which more than offset reduced sales volumes of chlorine and caustic soda to TDCC in the first quarter of 2015 due to planned turnarounds at TDCC facilities that consume these materials.

CAV’s cost of sales declined 3 percent, or $18 million, to $637 million in the first six months of 2015 from $655 million in the first six months of 2014. Lower cost of sales primarily reflected the lower cost of raw materials and utilities in the first six months of 2015 compared with the first six months of 2014 as a result of a decrease in natural gas prices (down approximately 40 percent compared with the first six months of 2014) which was the primary driver behind a $36 million reduction in CAV’s cost of power used in chlorine production. These declines were partially offset by higher spending of approximately $25 million at the Freeport, Texas and Plaquemine, Louisiana sites associated with planned maintenance turnaround activity and approximately $6 million of expenses associated with an unplanned VCM outage.

CAV’s EBITDA for the first six months of 2015 was $60 million, a decline of $23 million, or 28 percent, compared with $83 million in the first six months of 2014. EBITDA for the first six months of 2015 was unfavorably impacted by $31 million of spending related to planned maintenance turnarounds and the unplanned VCM outage, and margin compression (particularly in external sales of EDC and caustic soda), which was partially offset by lower utility costs and other spending reductions.

Epoxy. Net sales in the Epoxy segment were $1,050 million in the first six months of 2015, down 30 percent ($456 million) from $1,506 million in the first six months of 2014. This decrease was primarily driven by lower unit prices stemming from the decline in global oil prices and hydrocarbon raw material prices (e.g., propylene and benzene). Epoxy’s net sales—external were $905 million in the first six months of 2015, down 26 percent ($312 million) compared with $1,217 million in the first six months of 2014, primarily driven by lower cumene sales (down $215 million) due to a reduction in sales to a key customer. Epoxy’s net sales—related party were $145 million in the first six months of 2015, a decrease of 50 percent ($144 million) from $289 million in the first six months of 2014, driven primarily by a reduction in sales of acetone ($119 million) to TDCC.

Epoxy’s cost of sales for the first six months of 2015 declined 32 percent ($472 million), slightly more than the decline in net sales, to $998 million compared with $1,470 million in the first six months of 2014 primarily

 

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reflecting lower cost chlorine, caustic soda, and hydrocarbon raw materials (propylene and other propylene-based raw materials down $243 million and benzene down $139 million). Maintenance costs associated with planned turnaround activities in the first six months of 2015 were up $13 million compared with the first six months of 2014.

Epoxy’s EBITDA for the first six months of 2015 was $25 million, up $18 million from $7 million in the first six months of 2014. The increase in EBITDA reflected a decrease in sales of $456 million and a reduction in cost of sales of $472 million — reflecting disciplined margin management and expansion — and a $3 million reduction in SG&A and R&D expenses, which were partly offset by the increase in planned maintenance turnaround spending in Texas.

GCO. Net sales for the GCO segment were $199 million in the first six months of 2015, down 16 percent ($37 million) compared with $236 million in the first six months of 2014. Sales in the first six months of 2015 were negatively impacted by reduced volumes to a key customer that experienced a prolonged, unplanned outage, as well as lower price for methyl chloride, driven by a reduction in the market price of methanol raw material, which declined approximately 18 percent in Europe and 28 percent in the U.S. compared with the first six months of 2014.

GCO’s cost of sales for the first six months of 2015 decreased in line with sales (16 percent) to $187 million from $223 million in the first six months of 2014, reflecting a decline in sales volumes, lower purchased methanol costs ($9 million), and the lower cost of chlorine supplied internally by DCP’s CAV segment.

GCO’s EBITDA was $6 million in the first six months of 2015, up $5 million from $1 million in the first six months of 2014, as the impact of reduced sales volumes and compressed margins was more than offset by a $6 million reduction in SG&A and R&D expenses due to disciplined cost management.

Segment Results—2014 Versus 2013

CAV. Net sales in the CAV segment rose 4 percent in 2014 to $1,432 million up $52 million from $1,380 million in 2013, driven by increased sales volume with TDCC, particularly for urethanes applications. This increase was partially offset by a reduction in global caustic soda pricing, resulting from greater supply as new production capacity (from the JV Entity as well as other producers) came online in 2014. CAV reported lower VCM sales volume as a result of planned maintenance turnaround activity that limited production. Net sales—external in the CAV segment declined 1 percent, as a 1 percent increase in volume was more than offset by price declines, mainly due to lower caustic soda pricing globally. Net sales—related party rose 25 percent, driven by robust demand from TDCC for chlorine and caustic soda. Sales volume of chlorine was up 14 percent and caustic soda sales volume was up more than 20 percent compared with 2013.

Cost of sales for the CAV segment decreased $28 million in 2014 from 2013. Utilities expense declined $35 million, primarily related to the planned shutdown of a diaphragm caustic facility in the U.S. in the first quarter of 2014. The segment implemented significant, targeted spending reductions in line with soft external business conditions. Cost of sales was negatively impacted by sharply higher natural gas prices, spending on planned maintenance turnaround activity in the U.S. Gulf Coast, and an increase in depreciation and amortization expense of $80 million due to the start up of the JV Entity facility in early 2014. Cost of sales in 2013 was negatively impacted $66 million from the write off of two manufacturing facilities.

CAV’s EBITDA was $208 million in 2014, an increase of $135 million compared with 2013. The increase reflected increased sales, driven by higher sales volume in 2014, particularly to TDCC, CAV’s EBITDA in 2013 was negatively impacted by the write-off of two manufacturing facilities.

 

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Epoxy. Net sales in the Epoxy segment rose sharply to $2,872 million in 2014, an increase of 15 percent ($368 million) compared with 2013. This increase was primarily driven by increased sales volume, reflecting a focus on recapturing end-market share by leveraging low-cost position and scale. As a result, net sales—external for the Epoxy segment rose 12 percent, driven by a 3 percent decrease in price and a 15 percent gain in volume. Net sales—related party also rose significantly, up 31 percent, primarily reflecting increased demand.

Epoxy’s cost of sales increased $351 million in 2014, reflecting higher sales volumes and higher unit prices for hydrocarbon raw materials, particularly propylene (up $69 million), benzene (up $88 million) and other propylene-based raw materials. Higher natural gas prices led to higher cost chlorine and caustic soda (up approximately $14 million).

Epoxy’s EBITDA was $5 million in 2014, up $43 million from a loss of $38 million in 2013. The increase in EBITDA reflected an increase in sales of $368 million, due to focused efforts to drive higher sales volumes, increased cost of sales of $351 million, primarily reflecting the increased sales volumes, as well as a $27 million decrease in SG&A and R&D spending, driven by lower spending on research and developments projects and disciplined expense control.

GCO. Net sales for the GCO segment declined 4 percent ($19 million) to $472 million in 2014, mainly due to reduced sales volume following the closure of a chloromethanes plant in the U.S. at the end of 2013, at which time GCO exited two large contractual relationships. Net sales—external decreased 5 percent, primarily due to reduced sales volume as a result of the closure of the chloromethanes plant. Net sales—related party rose 3 percent.

GCO’s cost of sales decreased $6 million in 2014, as the impact of higher unit costs of raw materials, including methanol, chlorine and caustic soda were more than offset by the impact of lower sales volume.

GCO’s EBITDA in 2014 was $22 million, down $15 million from $37 million in 2013, primarily due to reduced sales volume as a result of challenging business conditions throughout the year, which resulted in soft demand, and increased raw material costs resulting in downward pressure on profit margins.

Segment Results—2013 Versus 2012

CAV. The CAV segment’s net sales were $1,380 million in 2013, down 6 percent ($90 million) compared with 2012. This decline in net sales was primarily driven by lower sales volume of caustic soda resulting from planned maintenance turnaround activity that limited availability of product for sales, and reduced internal DCP demand for chlorine, which reduced the amount of associated caustic soda produced. Net sales—external decreased 8 percent, primarily driven by lower sales volume due to these two factors. Net sales—related party rose 5 percent year-over-year as a 5 percent decline in volume was more than offset by an increase in price resulting from a rise in raw material costs, primarily natural gas used for power production.

Despite the decrease in sales volume, CAV’s cost of sales increased $34 million as a result of higher planned maintenance turnaround spending, reduced operating rates, and higher natural gas costs used for power production (up $29 million). Cost of sales in 2013 was negatively impacted $66 million from the write off of two manufacturing facilities. These cost increases were partially offset by $11 million lower supply chain costs resulting from the end of a tolling relationship, and a decrease in freight costs due to lower caustic soda sales volumes. These factors led to a cost of sales trend that was not commensurate with CAV’s revenue decline, as the segment was not able to offset cost increases with spending reductions.

CAV’s EBITDA in 2013 was $73 million, down $137 million from $210 million in 2012. The decline in profitability was driven by sales volume reductions in caustic soda, as well as reduced internal DCP demand for chlorine, reduced operating rates, higher maintenance turnaround spending, and increased SG&A and R&D spending of $10 million.

 

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Epoxy. Net sales in the Epoxy segment were $2,504 million in 2013, down 10 percent ($265 million) from 2012. The reduction in sales reflected a broad-based volume contraction as Epoxy faced significant competitive pricing pressures stemming from industry oversupply, which led to a loss of end-market share. Net sales—external declined 11 percent (due to lower volume) compared with the prior year while Net sales—related party were flat year-over-year.

The Epoxy segment reported a decrease in cost of sales of $121 million. Hydrocarbon raw material costs decreased $80 million, as decreased consumption commensurate with the decline in sales volume was partially offset by higher market prices, particularly propylene and benzene.

Epoxy’s EBITDA was a loss of $38 million in 2013, a decline of $115 million compared with $77 million in 2012. The decline in EBITDA reflected decreased sales volumes from global competitive pressures and end-market losses, and higher raw material prices, partially offset by a reduction in SG&A and R&D expenses.

GCO. GCO’s net sales in 2013 were $491 million, down 6 percent ($32 million) from 2012, reflecting deterioration in global pricing as industry conditions softened as a result of significant new industry capacity additions, predominantly in Asia Pacific, coupled with aggressive competitor behavior that put significant pressure on global pricing. Net sales—external declined 9 percent, primarily due to global pricing declines (down 8 percent). Net sales—related party rose 12 percent year-over-year, due to additional demand.

GCO’s cost of sales declined $2 million in 2013 as a $9 million increase in methanol raw material costs was more than offset by the reduction in sales volume.

GCO’s EBITDA was $37 million in 2013, down $20 million from $57 million in 2012, as EBITDA was negatively impacted by the deterioration of global pricing, higher raw material costs and lower sales volume.

Liquidity and Capital Resources

Globally, TDCC utilizes a centralized cash management system. Therefore, DCP cash requirements are provided by TDCC and affiliates. Cash generated by/used by DCP is remitted/received directly to/from TDCC.

In connection with the Transactions, Splitco expects to incur new indebtedness. See “Debt Financing.”

In 2014, cash provided by operating activities of $223 million was more than sufficient to fund capital expenditures of $88 million.

Cash flow—Six months ended June 30, 2015 Versus Six months ended June 30, 2014

DCP’s cash used in operating activities in the first six months of 2015 was $65 million, a decrease of $185 million compared with $120 million of cash provided in the first six months of 2014, reflecting reduced participation in Dow’s various trade accounts receivable securitization programs.

Cash used in investing activities was $32 million in the first six months of 2015. The $17 million decrease from a use of $49 million in the first six months of 2014 reflected improved cash flow from a reduction in capital spending.

Cash provided by financing activities was $97 million in the first six months of 2015, up from a $71 million use of cash in the first six months or 2014. The increase in cash from financing activities is mainly attributable to cash transfers from parent to cover working capital needs.

Cash Flow—2014 Versus 2013

DCP’s cash provided by operating activities in 2014 was $223 million, an increase of $75 million from $148 million reported in 2013. The significant driver for the improvement in cash provided by operating activities was a $163 million improvement in EBITDA as a result of improved business profitability. Cash provided by operating activities was also favorably impacted by income taxes.

 

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Cash used in investing activities was $107 million in 2014, an improvement of $129 million from a use of $236 million in 2013. This improvement was primarily related to lower construction spending associated with the JV Entity.

Cash used in financing activities was $116 million in 2014, down $204 million from provided cash of $88 million in 2013. The decline in cash from financing activities is mainly attributable to the JV Entity, which raised less long-term debt in 2014 and instead started making payments against its long-term debt obligations after startup of the facility in early 2014.

Cash Flow—2013 Versus 2012

DCP’s cash provided by operating activities in 2013 was $148 million, a decrease of $165 million from $313 million reported in 2012. The decline in cash provided by operating activities was predominantly due to a $272 million decline in EBITDA as a result of deteriorating business conditions.

Cash used in investing activities was $236 million in 2013, an improvement of $306 million from a use of $542 million in 2012. This improvement was primarily related to lower construction spending associated with the JV Entity, as well as reduced capital expenditures.

Cash provided by financing activities was $88 million in 2013, down $141 million from $229 million in 2012. The decline in cash provided by financing activities is primarily related to lower proceeds from the issuance of long-term debt associated with the construction of the JV Entity’s manufacturing facility in Texas.

Off-Balance Sheet Arrangements

DCP has no off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk

DCP’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors. TDCC monitors and manages these risks as an integral part of its overall risk management program. To manage such risks effectively, hedging transactions may be entered into, pursuant to established guidelines and policies to mitigate the adverse effects of financial market risk. No derivative instruments will be transferred to DCP as part of the Distribution.

Foreign Currency Risk

The global nature of DCP’s business introduces currency exposures. In addition to production facilities and operations located in different geographies, DCP has assets, liabilities and cash flows denominated in currencies other than the U.S. dollar. The primary objective of TDCC’s foreign exchange risk management is to optimize the U.S. dollar value of net assets and cash flows, keeping the adverse impact of currency movements to a minimum. Foreign currency exposure is due to non-dollar denominated inter-company loans resulting from the Distribution. In addition, there are U.S. dollar exposures on non-U.S. dollar functional companies located in Europe and Latin America derived from commercial activities. Where currency exposure is identified which has no natural offset, TDCC typically enters into hedging arrangements intended to mitigate the effects of currency fluctuations affecting current period earnings. Derivatives are utilized to do so and effective hedging relationships are pursued where an exposure requires a cash flow hedge. Management of Olin will define currency risk management strategies and policies after consummation of the Merger.

Commodity Risk

Inherent in DCP’s chlor-alkali business is exposure to price changes for several commodities. The main commodity exposure is related to changes in the market price of natural gas. The natural gas exposure stems primarily from energy consumption and generation. Physical and financial instruments are, at times, used to

 

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hedge these commodity market risks, when feasible. Derivatives utilized may vary in tenor depending on the hedging horizon and market liquidity for specific exposures. Management of Olin will define commodity risk management strategies and policies after consummation of the Merger.

Interest Rate Risk

DCP’s primary exposure is to the U.S. dollar yield curve. Through the consolidation of the JV Entity as a variable-interest entity, DCP has long-term project finance debt exposure outstanding of $553 million, the vast majority of which is floating rate debt. The small portion of fixed rate debt, which totals $10 million, has an estimated duration of 8.5 years. Management of Olin will define interest rate risk management strategies and policies after consummation of the Merger.

Contractual Obligations

The following table summarizes DCP’s contractual obligations and commercial commitments at December 31, 2014. Additional information related to these obligations can be found in Notes 9, 11, 13, 15 and 17 to the combined financial statements of DCP for the year ended 2014 included elsewhere in this document.

 

Contractual Obligations at December 31, 2014    Payments Due by Year         

In millions

   2015      2016      2017      2018      2019      2020 and
beyond
     Total  

Long-term debt – current and noncurrent (1) (2)

   $ 53       $ 49       $ 46       $ 46       $ 46       $ 366       $ 606   

Deferred income tax liabilities – noncurrent (3)

     —           —           —           —           —           93         93   

Other noncurrent obligations

     —           18         18         18         17         18         89   

Operating leases (4)

     10         —           —           —           —           —           10   

Purchase commitments – take-or-pay and throughput obligations

     7         5         36         36         33         260         377   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 70       $ 72       $ 100       $ 100       $ 96       $ 737       $ 1,175   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Debt of the JV Entity, a consolidated variable interest entity, which is non-recourse to DCP. This debt is expected to be refinanced in connection with the Transactions
(2) On or about the closing date of the Merger, Splitco expects to incur indebtedness of approximately $2,237 million (a portion of which will consist of indebtedness of Olin which will be guaranteed by Splitco after the consummation of the Merger). A portion of the proceeds thereof will be used to refinance the existing debt of the JV Entity. Terms of this financing are described in more detail under “Debt Financing.” Splitco also expects to issue the Splitco Securities immediately prior to the consummation of the transaction. These securities are expected to have a maturity date of at least eight years and are expected to be non-callable for a period of at least five years.
(3) Deferred income tax liabilities may vary according to changes in tax laws, tax rates and the operating results of the Dow Chlorine Products Business. As a result, it is impractical to determine whether there will be a cash impact to an individual year. All noncurrent deferred income tax liabilities have been reflected in “2020 and beyond.”
(4) There are no non-cancelable lease terms in excess of one year.

 

 

 

 

 

 

Critical Accounting Estimates

The preparation of financial statements and related disclosures in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the combined financial statements and accompanying notes. Note 2 to the combined financial statements of DCP included elsewhere in this document describes the significant accounting policies and methods used in the preparation of the combined financial statements. The following are DCP’s critical accounting policies impacted by judgments, assumptions and estimates.

Allocations

The combined statements of income (loss) and comprehensive income (loss) include allocations of certain expenses for services including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, ethics and compliance, shared services, employee benefits and incentives, insurance and stock-based compensation. These expenses have been allocated on the basis of direct

 

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usage when identifiable with the remainder allocated on the basis of headcount or other measures. DCP considers the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided. The allocations may not, however, reflect the expense DCP would have incurred as a stand-alone company. Actual costs that may have been incurred if DCP were a stand-alone company would depend on a number of factors including DCP’s chosen organizational structure, what functions were outsourced or performed by DCP employees and strategic decisions made in areas such as information technology and infrastructure.

Environmental Matters

The costs of environmental remediation of facilities are determined based on evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress, or as additional technical or legal information becomes available. At December 31, 2014, DCP had accrued obligations of $64 million for probable environmental remediation and restoration costs, which represents management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which DCP has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately one and a half times that amount. For further discussion, see Note 11 to the combined financial statements of DCP included elsewhere in this document.

Pension and Other Postretirement Benefits