Adage Capital Hikes Holding In Olin Corporation (OLN) Ahead Of Big Dow Acquisition

Adage has held a stake in Olin Corporation (NYSE:OLN) since the fourth quarter of 2014. The $1.53 billion chemicals company, which operates in three main segments: Chlor Alkali Products, Chemical Distribution, and Winchester has hit a rough patch recently, as its stock is down by more than 12% year-to-date. In stark contrast, the specialty chemicals industry has posted average gains of 9.32% during the same period. Things took a turn for the worse after Olin Corporation (NYSE:OLN) missed both the top and bottom line estimates with its first quarter financial results. Although the company’s second quarter EPS of $0.54 was $0.24 ahead of estimates, revenues of $535.4 million were $18.3 million lighter than expected, and the stock price began a prolonged descent over the following months.

Market prices have been another prime factor weighing down on Olin Corporation (NYSE:OLN)’s performance. Even though chlorine prices have improved slightly, they have been more than offset by the tumbling price of caustic soda. However, following the finalization of its acquisition of Dow Chemical’s chlor alkali division in the fourth quarter, which will almost double the size of Olin Corporation (NYSE:OLN), this pricing problem will be reined in. The number of chlorine-based products will increase to 19 from three, removing the cyclicality aspect of its products. Moreover, the epoxy and chlorinated organic business being acquired are much more sensitive to manufacturing costs than the market pricing. Olin Corporation (NYSE:OLN) expects to realize about $200 million worth of synergies from this acquisition, with the manufacturing cost of some of its products being slashed by one-third.

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