Corning Incorporated (NYSE:GLW) announced that it will exchange its 50% interest in Dow Corning Corporation for 100% of the stock of a newly formed entity that will become a wholly owned subsidiary of Corning Incorporated. The newly formed entity will hold approximately 40% ownership in Hemlock Semiconductor Group and approximately $4.8 billion in cash. Corning expects the realignment to be substantially tax-free.
Upon completion of the exchange, The Dow Chemical Company, an equal owner of Dow Corning with Corning since 1943, will assume 100% ownership of Dow Corning.
Wendell P. Weeks, chairman, chief executive officer and president, said, “We believe this strategic realignment will create significant value for our shareholders by further focusing our portfolio and increasing our financial strength.
“We are proud of Dow Corning’s success, and pleased that our 72-year partnership will continue through our ownership in Hemlock Semiconductor. Today, however, Dow Corning’s silicones business lies outside the technologies and manufacturing platforms core to our strategic framework.”
Hemlock Semiconductor, a leading provider of polycrystalline silicon used in the manufacturing of semiconductor and solar devices is currently 80.5% owned by Dow Corning. In 2015, Hemlock is expected to generate approximately $1 billion in sales and $160 million in earnings and contribute approximately $65 million in gross equity earnings to Corning. Upon completion of the strategic realignment, Hemlock will be 40.25% owned by Corning through the newly formed entity; 40.25% owned by Dow Corning Corporation; and 19.5% owned by Shin-Etsu Handotai Co. Ltd. Hemlock has approximately 1,000 employees.
R. Tony Tripeny, senior vice president and chief financial officer, said, “This exchange unlocks the value of Dow Corning. While we will no longer receive equity earnings or dividends from Dow Corning’s silicones business, we are confident that Hemlock and deployment of the new entity’s $4.8 billion will create significant value for our shareholders, including EPS accretion.”
The strategic realignment, approved by the boards of Corning and Dow Chemical, is expected to close during the first half of 2016. It is subject to customary closing conditions including regulatory approvals.
J.P. Morgan Securities LLC served as financial adviser to Corning on the transaction. Kirkland & Ellis LLP and KPMG LLP provided legal and tax advice to the company, including opinions that the realignment is substantially tax free. (Original Source)
Shares of Corning Inc closed yesterday at $17.69, down $0.06 or -0.34%. GLW has a 1-year high of $25.16 and a 1-year low of $15.42. The stock’s 50-day moving average is $18.43 and its 200-day moving average is $18.37.
On the ratings front, Corning has been the subject of a number of recent research reports. In a report issued on November 19, Susquehanna analyst Mehdi Hosseini reiterated a Buy rating on GLW, with a price target of $22, which represents a potential upside of 24.4% from where the stock is currently trading. Separately, on October 28, RBC’s Mark Sue reiterated a Buy rating on the stock and has a price target of $24.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Mehdi Hosseini and Mark Sue have a total average return of -6.4% and 1.5% respectively. Hosseini has a success rate of 39.0% and is ranked #3316 out of 3638 analysts, while Sue has a success rate of 53.3% and is ranked #1315.
Corning Inc is engaged in manufacturing of specialty glass and ceramics. The Company’s segments are Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials and Life Sciences.