The transaction, expected to close in the first half of 2016, will help Dow capture $400-million in cost savings from the restructured ownership. For example, Dow sells solar shingles and DuPont sells an adhesive for solar panels. Both companies are based in Midland, Michigan. It’s still unclear who will run the newly formed companies following the three-way breakup.
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Material Science: “A pure-play industrial leader, consisting of DuPont’s Performance Materials segment, as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions, and Consumer Solutions… operating segments”. Delaware-based DuPont is the parent company of Iowa-based Pioneer. It expects to record a pretax charge of about $780m, with approximately $650m of employee separation costs and about $130m of asset-related charges and contract terminations.
DOW Chemical and the DuPont have announced that they are merging in a $US130 billion (178 billion) chemical industry megadeal. “None of this, of course, is any solace for the workers and families who will be affected by this transition”.
While DuPont argued that its stock had outperformed traditional measures like the Standard & Poor’s 500-stock index, Trian argued that the company had not cut enough costs and repeatedly missed financial performance targets.
Dow is buying out Corning in their joint venture of Dow Corning, a deal worth $4.8 billion, which is expected to generate $1 billion in revenues.
“Any merger that consolidates this market into fewer hands will give farmers fewer choices and put them at even more economic disadvantage”, said Wenonah Hauter, executive director of the advocacy group Food & Water Watch, in a statement.
The two companies are longtime blue chip stars of United States industry.
“This transaction represents a tectonic shift in an industry that has been evolving in the last many years, and it is a culmination of a vision we’ve had for more than a decade to bring together these powerful innovation-driven ag and material science leaders”, Liveris said in a conference call with investors this morning. The companies have yet to make a determination about the headquarters of the three new firms or the fate of facilities such as Dow’s Philadelphia-area R&D center or both companies’ facilities near Detroit.
“We’ve created three leading, strategic platforms, instead of splitting DuPont into three small pieces”, he said.
The joining of two of the oldest and biggest USA chemical producers will draw regulatory scrutiny. Liveris has been reshaping Dow through divestitures, including selling its chlorine business on which the company was founded 118 years ago. It’s ahead of EMC-Corp-Dell and Kraft-HJ Heinz.
Similarly, Dow CEO Andrew Liveris told analysts in October that there were “potential synergies in a newly consolidating agricultural market” regarding Dow AgroSciences. “This deal had to be had to create value for shareholders”.
The company that will emerge from this latest merger will be known as DowDupont, and will have so much economic heft in the marketplace that the companies are calling the merger a “game changer”, in a press release distributed today.
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Under the terms of the merger, Dow shareholders would receive one share of the new combined company for every one of their shares, while DuPont shareholders would receive 1.282 shares each. In addition, the companies announced separate restructuring steps.
