The Dow Chemical Company (NYSE: DOW – $48.47) and Olin Corporation announced a tax efficient agreement under which Dow will separate a significant portion of its chlorine business and merge with Olin in a transaction that will create a “new Olin Corp.” with revenues of about $7 billion. The transaction has a taxable equivalent value of $8 billion to Dow shareholders. The terms of the agreement call for Dow to separate its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy units, and then merge these businesses with Olin whereby Dow shareholders will receive approximately 50.5% of the shares of the combined company, with existing Olin shareholders owning the remaining 49.5%. The transaction is valued at $5 billion, and includes $2.0 billion of cash and cash equivalents to be paid to Dow; an estimated $2.2 billion in Olin common stock; and about $800 million of assumption of Dow pension and other liabilities. In addition, by virtue of the joint share ownership, both sets of shareholders will benefit from a minimum of $200 million in projected annual synergies and cost savings. While Dow announced the divestiture of the chlorine business back in 2013, there were no specific details on the approach Dow would take. With one of its legacy operations off the books, Dow will concentrate on more high-margin proprietary products and should provide an earnings multiple expansion to the 14 times earnings currently afforded to the shares. While full-year 2015 earnings may not reach more than $3.06 per share, analysts are looking for a possible $3.58 – $3.62 next year. Along with a generous 3.6% dividend yield, Dow’s total return potential is attractive assuming the global economy can get back on track.