Dow Chemical and Dupont, giants of chemical and agricultural products, are finalizing a $130-billion merger that would be the 18th largest deal ever.
Advertisement
The deal calls for Michigan-based Dow Chemical and Delaware-based DuPont to merge into one company by the second half of 2016.
The companies said their individual agrochemical operations have scant overlap, and asset sales that would result from the merger should be minor.
DuPont Chief Executive Ed Breen will be CEO of DowDuPont, and Dow Chemical CEO Liveris will be executive chairman.
Although both the companies have not passed any comment over this deal so far.
The New York investment firm said it was approached by the companies to “assist in negotiations”, including on structure and governance of the combined entity and the planned spinoffs.
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.
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. This company’s combined 2014 revenue was about $51 billion on an adjusted basis. As per analysts, the deal announced on Friday will have to face severe regulatory scrutiny.
Nelson Peltz, an activist investor who has been prodding DuPont to break up, and Daniel S. Loeb, who has been doing the same for Dow, have yet to weigh in on the merger.
Dow has strength in soybeans, while DuPont is strong in corn. When an analyst pointed out during the conference call that the cuts appeared low relative to the combined firm’s expected $3.6 billion in annual R&D spending, Breen remarked, “You don’t want to affect the future growth of these businesses”. “To the extent that they are happy with DuPont now, the employees, the business decisions made at DuPont Pioneer, could only probably improve to better focus on farmers as customers”, King said.
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.
“We will have the most complete portfolio of any ag company”, split roughly 50:50 between seed and agrichemical operations, compared with a Monsanto operation skewed towards seeds, and Syngenta to sprays. Dow avoided a potential proxy fight previous year by adding four independent directors to its board, giving seats to two Loeb nominees. It will combine Dow’s plastics business, a leader in polyethylene and elastomers, with DuPont’s materials unit, which makes engineering polymers and ethylene copolymers.
The smallest of the three companies would be the specialty products company, which will sell to electronic and communication industries. This leading global pure-play Agriculture Company will unite the two companies’ seed crop protection businesses.
Liveris, 61, will oversee the materials science company, which will keep the Dow name after reorganization. The company will have dual headquarters in MI and DE where the two companies are now based.
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.
The new board would have 16 members, with each company contributing eight directors, the companies said.
Advertisement
Dow was founded in 1897 by Canadian-born chemist Herbert Dow to produce bleach using new technology he had developed to extract chlorine from brine.
