Dow Chemical is to sell most of its chlorine assets to Olin Corp. in tax-efficient deal valued at $5 billion.

The two companies announced on Friday that they had signed a definitive agreement under which Dow will merge a significant portion of its chlorine operations with Olin, creating an industry leader in chlor-alkali and derivatives with revenues close to $7 billion.

Chlor-alkali is used to make chlorine and caustic soda. These chemicals have applications in a variety of industries including healthcare, textiles and automotive.

Dow intends to separate its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, and then merge these businesses with Olin in a Reverse Morris Trust transaction. Dow shareholders will receive approximately 50.5 percent of the shares of Olin, with existing Olin shareholders owning the remaining stake of approximately 49.5 percent.

Olin will continue to be led by its chairman and CEO Joseph D. Rupp, alongside a senior management team comprised of both Dow and Olin employees.

Rupp said that the merger will create "a sustainable, long-term growth platform" and enhanced value for shareholders and customers.

The two firms also agreed a separate, 20-year long-term capacity rights agreement for the supply of ethylene by Dow to Olin.

The merger currently remains subject to approval by Olin shareholders, as well as certain tax authority rulings and regulatory clearance.