Dow Chemical on Friday took another step to streamline itself in the face of pressure from the activist investor Daniel S. Loeb, agreeing to separate its chlorine business and merge it with the Olin Corporation, another chemical company.

The deal will deliver about $5 billion to Dow, including about $2 billion in cash, and it is structured as a tax-efficient Reverse Morris Trust transaction. The enlarged Olin will have revenue of about $7 billion.

The shedding of another big Dow business comes just months after the big chemical company agreed to add four new independent directors to its board. That was a breakthrough in what until late November had been an escalating fight between Dow and Third Point, the hedge fund run by Mr. Loeb.

Weeks before the companies settled, avoiding a proxy fight, Mr. Loeb set up a website assailing Dow’s management, including its chief executive, Andrew N. Liveris.