One rarity in this merger – shareholders will hold 50 percent of both companies’ stocks and the board will be split equally between representatives from both companies.
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Dow Chairman and CEO Andrew N. Liveris will become executive chairman and DuPont CEO Edward D. Breen will be named CEO of combined company.
“I think it helps the fact that they are going to be breaking up into three companies after this, even though that’s probably another year or two after the closing of the deal”, Pultz told Benzinga. Dow and DuPont shareholders will own about 50 per cent, respectively, of the combined company. The merger faces a gauntlet of regulatory approval and approval by Dow and DuPont shareholders.
DuPont and The Dow Chemical Company have agreed to an all-stock merger that will bring together two of the largest chemical industry titans in the United States.
Dow said with full control of the joint venture, it will extend its participation in Consumer Solutions and Infrastructure Solutions segments by increasing its product offerings in several attractive end use applications – such as building and construction, consumer care and automotive. After finishing the deal, they intend divide into three firms – one focused on one on specialty products, one on material science and agriculture. Dow was formed in 1897 and DuPont was formed in 1802. The erstwhile rivals supplied products for everything from plastic wrap to components for weapons.
The agrichemical company is expected to generate $19 billion through the sale of seeds and chemical insecticides to the agricultural industry. Liveris in a statement called the deal “a game-changer for our industry” that will adjust the centuries-old corporations to the realities of the modern global chemicals business.
Executives from both companies said the agrichemicals businesses have little overlap and any asset sales would likely be minor. The three companies will focus on agriculture, materials, and specialty products.
The merger is expected to result in major job cuts, as DuPont has said it will shed about 10 per cent of its global workforce in its restructuring ahead of the deal. Delaware-based DuPont is the parent company of Iowa-based Pioneer.
“Our initial take is, given the commodity nature of Dow’s business and the resulting low barriers to entry, the valuation is not obviously attractive”, said Grayson Witcher, portfolio manager at Mawer Investment Management Ltd. About two weeks ago, the company notified Trian about the deal talks after having signed a nondisclosure agreement, according to a person briefed on the matter who was not authorized to speak publicly about private discussions.
Generally, it is agriculture and performance materials and chemicals where regulators will have to spend the most time looking at antitrust claims.
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“When I look at DuPont and Dow, I see businesses that fit together like hand in glove”, Breen said. An additional upside of about $1 billion is expected from growth synergies. The company will be headquartered in both Midland and Wilmington. First and foremost, after the companies merge then split, which one will retain DuPont’s spot in the Dow Jones Industrial Average – if any of these three companies do – or whether this spot will be open to an outsider.
