My Chemical Romance: Olin Corporation Thesis
Chinese Overcapacity, Market ignorance, and artificially low interest rates hide a remarkably valuable business
Market Cap: $2,296,130,000
P/B: 1.17x
Net Debt: $3,163,900,000
EV: $5,491,530,000
Shares Outstanding: 114,120,000
Introduction & Business Overview
Beginnings
Olin Corporation dates back to 1892 when its founder Franklin W. Olin started Equitable Powder Company in New York City supplying industrial explosives to mining operations. As the combustibles business expanded EPC soon expanded into ammunition manufacturing via its subsidiary Western Cartridge Company and in 1931 would acquire Winchester Repeating Arms. Fast forward to 1935 and Western and Winchester merged to form Winchester-Western which made Olin a force in the US small arms business throughout the first and second World Wars. As World War II ended Olin decided to amalgamate Winchester-Western under its Olin Industries parent company and a decade later Olin would merge with Mathieson Chemical to form Olin Mathieson Chemical Corporation.
Starting in 1970 Olin would begin to divest of non-core business lines selling off its Winchester firearms division in 1980 and retained only the ammunition portion of the firm. In 1999 Olin spun off its specialty chemical arm called Arch Chemicals which focused Olin solely on Chlorine, Caustic Soda, Epoxy, and Ammunition. In 2007 Olin had sold off its Metal & Brass division to KPS Capital for $400M while simultaneously acquiring Pioneer Chemicals for $414M adding another chlor-alkali producer to the mix. Of all the mergers and divestures that occurred since the early 1900s the most substantial occurred in 2015 when Olin merged with Dow Chemical’s chlor-alkali, vinyl’s and epoxy via a Reverse Morris Trust transaction. The Dow merger added $5B in assets and $2B in cash to Olin’s balance sheet and made the business the largest integrated chlor-alkali producer in the world.
Business Segments