A merger of DuPont and Dow, each with a market capitalization of more than $60 billion, would create the world’s second-largest chemical company, behind BASF SE.
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The three companies would focus on agriculture, materials and speciality products.
Dow Chemical CEO Andrew Liveris will become executive chairman of the new entity, while DuPont CEO Edward Preen will become chair and CEO.
Peltz had lost one proxy battle for the board seats at DuPont this May but CEO Ellen Kullman chose to step down this October after losing the confidence of the shareholders of the company.
Activist investors had argued for two years that shareholders of both companies would generate greater value if they were broken up, Bloomberg reported. The eventual breakup of DowDuPont into three independent, publicly traded companies through tax-free spin-offs is expected over 18 to 24 months following the completion of the merger.
“This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders”, Liveris said in a statement.
DuPont and Dow are both having a hard time coping with the falling demand of farm chemicals even as their plastic units report an increase in margins because of the low price of natural gas.
Shares of The Dow Chemical Co., based in Midland, Michigan, rose nearly 11 percent to $56.40 in afternoon trading after hitting an all-time high of $56.88 earlier in the day.
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Similarly, Dow has been under pressure from hedge fund Third Point LLC, lead by activist investor Dan Loeb, to split its specialty chemical and petrochemical businesses. Dow rejected Loeb’s proposal to separate its petrochemicals and specialty-chemicals businesses, responding instead with plans for share buybacks and asset sales. “And I would say, just looking at it, consolidation should happen”.
