The three new companies will include a $51 billion (yearly sales) “materials science” company selling plastics, chemicals, construction, and consumer products; a $19 billion pesticides and seeds company for agricultural products; and a $13 billion “specialty products” company focused on enzymes, safety, and electronics products.
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The Material Science Company will consist of DuPont’s Performance Materials segment and Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer Solutions segments. Forecasters presume the corn seed segment to be divested to satisfy antitrust regulators, despite DuPont CEO Edward Breen saying that no major divestitures are expected.
On Friday, a Trian representative said, “Trian fully supports this transformative transaction and believes that the combination of DuPont and Dow is a great outcome for all shareholders”.
DuPont shares, part of the Dow Jones industrial average, fell 5.1 percent at $70.73, while Dow slid 3.4 percent at $53.05. The deal to combine two of the biggest and oldest U.S. chemical producers is a prelude to an eventual split-up of the combined company into three discrete businesses Dow and DuPont said on Friday.
Another activist investor, Dan Loeb, has been pushing Dow to split its agri business and other speciality chemical units from its petrochemical divisions.
Sheehan said the deal also could spark other mergers in the agriculture chemical industry.
“The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation”, SunTrust’s Sheehan said. The company will have dual headquarters in Midland, Mich., and Wilmington, Del., where they are now based.
Advisory Committees will be established for each business. Executives hope to create these firms 18 to 24 months after the Dow-DuPont merger is complete, expected in the second half of 2016. Both firms will look to cut costs and increase their respective positions in various markets.
“We did not take out anything that could help these companies for growth in the future”, Breen said.
Executives boast that the two companies have complementary offerings in packaging, especially in multilayered structures, where, for example, DuPont’s Surlyn resin might be used with Dow’s linear low-density polyethylene. It was not immediately clear how many total layoffs the new company plans, but the merger announcement talks broadly about billions in cost savings and expected growth to benefit shareholders. DuPont says it will be cutting its global workforce by 10%. DuPont was founded in 1802 in Delaware.
Dow Chemical Co. has signed definitive agreements to restructure the ownership of Dow Corning Corp., its silicone joint venture with Corning Inc. The companies said the proposed merger of equals, approved unanimously by their respective directors, will result in cost synergies of about $3 billion that are projected to create approximately $30 billion of market value.
Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share.
For 2014, Dow Corning posted net profit of $513 million on sales of $6.22 billion, according to information posted on its website.
Dow shareholders would get 52% of the new company.
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The US chemicals conglomerates on Friday revealed details of a merger, rumoured earlier this week, which will see the group initially combine into DowDuPont- a group with revenues of some $84bn a year, at 2014 values, and earnings before interest, tax, depreciation and amortisation of $15bn.
