Dow Chemical and DuPont Co., two historic giants of USA industry, said Friday they will merge in a deal that will combine products from both Dow and DuPont in the areas of agriculture, commodities chemicals and specialty chemicals.
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Culminating a week’s worth of speculation and suspense, Dow Chemical and DuPont have announced the largest-ever merger between two chemical companies. Then by 2018 the companies will split into three independent publicly traded companies-focused on agriculture, chemicals and materials, and specialty products.
The speciality products company would sell materials to the electronics and communications industries as well as to the safety and protection sectors. Until this time, shareholders of both companies will hold 50% shares in the combined company. “I think the big catalyst would have been (DuPont Chief Executive Ed) Breen coming in, his track record of extracting value from companies, and the fight that DuPont had gone through with Nelson Peltz”, Plaza said.
In a recent conference call, Breen said that DuPont and Dow Chemical “fit together like hand in glove”.
The companies said they believe they can extract $3 billion in annual costs within 24 months, and expect about $1 billion in “growth synergies”.
DuPont in another statement said it would cut costs by 700 million in 2016 affecting 10 percent of its global workforce. With its home in MI since 1897, Dow has approximately 53,000 employees globally and about 6,000 employees in the state.
The deal will, in agriculture, create the opportunity for $1.3bn of deal benefits, such as cutting out duplicated costs, out of a total of some $3bn from the Dow-DuPont merger. “By bringing together DuPont’s unrivaled market access and industry-leading germplasm and breeding capabilities, and Dow’s strengths in traits in crop protection, we will have the most complete portfolio of any ag company”. DuPont’s ag business has more than $11 billion in sales last year, while Dow Agro has about $7 billion per year.
In a separate announcement today, which will further impact the Materials Science business, Dow announced that it had signed definitive agreements to restructure the ownership of Dow Corning.
“The bigger and more transformative the deal, the more likely it will in fact affect competition in some fashion, even with a remedy”, Grunes said. Combined pro forma 2014 revenue for Materials Science is about $51 billion. Dow Automotive is a leader in thermoset plastics, which can not be remolded and are used in exteriors and “in-car” products, while DuPont’s automotive unit primarily focuses on thermoplastics, which soften when heated, and various “under the hood” products.
The analysis contrasts with the large disposals that were seen likely necessary to enable the takeover of Syngenta that Monsanto attempted earlier this year, but was rebuffed by its Swiss peer in part on indeed on concerns of the likely level of antitrust interference the deal would cause. Termed as the “deal of three centuries”, the merger news has been welcomed by activist investors. With that share exchange ratio, DuPont shareholders would get $70.38 a share for their stock, or about $62 billion overall, based on Thursday’s closing prices.
But he said the two companies have complementary strengths that are not duplicative.
The companies have two of the best-known names in US corporate history.
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Seeds and chemical maker Dow Chemical Co (DOW.N) said it would assume full control of Dow Corning, its joint-venture with Gorilla glass maker Corning Inc (GLW.N). “About “$1 billion in growth synergies” are also expected to be achieved, according to officials. DuPont was founded in 1802 in DE by Eleuthere Irenee du Pont, a French political economist who had fled to the United States during the French Revolution.
