Dow Reports Rapid Progress on Carbide Merger; Raises Synergy Target to $1.1 Billion
The company plans to achieve annualized cost synergies of $1.1 billion by the end of the first quarter of 2003, which is substantially higher than its original projection of $500 million when the transaction was first announced in August 1999. Cost synergies are being achieved through the standardization of work processes and organizational structure, procurement savings and the elimination of redundant roles and facilities. As part of the company's plans to achieve the higher cost synergy target, Dow is reducing its global workforce by approximately 4,500 employees or 8 percent.
"Achieving these synergies will be critical to ensure that this merger creates long-term value for our stakeholders," said Michael D. Parker, Dow president and chief executive officer. "Fundamental to our approach to employees has been the expectation that everyone – whether staying or leaving – will be treated with the utmost respect and dignity," he said, adding that the company is taking innovative approaches to help lessen the impact to employees whose jobs are being eliminated.
Parker noted that the transaction is expected to become accretive to Dow's earnings during the first half of 2002, with earnings benefits coming from both cost savings and top line growth.
Last week in its first quarter earnings release, Dow reported a special charge of $1.4 billion (pretax) for merger-related expenses and restructuring. These expenses included transaction costs, employee severance and the write-down of duplicate assets and facilities.
According to Parker, "Dow is an incredibly energized company. As we accelerate our aggressive pursuit of both cost and growth synergies, we will create greater value than either Dow or Union Carbide could have realized separately."
In 2000, on a combined basis, Dow and Union Carbide had revenues of $29.5 billion, earnings before interest and taxes of $3.1 billion, and assets of $36 billion. Dow disclosed combined historical financial information for the combined companies in several recent filings with the U.S. Securities and Exchange Commission.
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