Since their founding in the 19th century, both companies have made significant discoveries in chemistry, changing how homes are built and painted, and how food is grown and stored.
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Dow Chemical and DuPont said on Friday that they will merge to create the world’s biggest chemical company.
In a recent conference call, Breen said that DuPont and Dow Chemical “fit together like hand in glove”. It will create a $130 billion company that combines products from both Dow and Du-Pont in the areas of agriculture, commodity chemicals and specialty products to create the new businesses.
Dow Chemical CEO Andrew Liveris would be the executive chairman of DowDupont, and current Dupont CEO Edward Breen would be the chairman and CEO.
Dow has strength in soybeans, while DuPont is strong in corn.
The merger brings to a close a record year for deal-making, surpassing a levels unseen since 2007.
Dow and DuPont shares fell on Friday after spiking earlier in the week following reports of negotiations.
“DuPont and Dow are two titans of American industry and the proposed merger demands serious scrutiny”, said Senate Judiciary Committee Chairman Chuck Grassley, a Republican from the Farm Belt state of Iowa.
In remarks to investors, the men said they had used advice from corporate raiders Daniel Loeb of the Third Point hedge fund group, which owns 2 percent of Dow, and Nelson Peltz of the Trian hedge fund group, which owns 3 percent of DuPont, in designing the split-up, which they hope to conclude by late 2017.
The combined company will split into three business 18 to 24 months after the merger closes. Instead it will invest in a semiconductor business that is owned by Dow Corning. In the a year ago, Dow too has faced criticism from an activist investor.
James Sheehan, a SunTrust Robinson Humphrey analyst, said: “They need to merge first in order for the subsequent spin-offs to qualify as tax-free transactions in the United States”.
If completed, the merger would be the largest-ever deal in the chemicals industry.
“What we announced today with Dow Corning makes a science and materials powerhouse that is going to be based here”. The company, dubbed DowDuPont, will have dual headquarters in Midland, Mich., and Wilmington, Del. This division could ease the regulatory challenges.
Breen will lead the other two companies.
“These are highly complementary businesses….” The companies “have historically unprecedented power over world agriculture, enabling them to control the agricultural research agenda, heavily influence trade and agricultural agreements and subvert market competition”, the organization says. The market value is projected at $30 billion, however, for growth synergies, $1 billion is anticipated.
After the merger, the company plans to divide into separate entities.
It’s due out in the spring – around the same time DuPont expects to be in the midst of laying off 10 percent of its employees worldwide.
DowDuPont plans additional cost cutting once it is formed.
It announced on Friday that it would buy the remaining stake in the Corning joint venture. Combined pro forma 2014 revenue for Specialty Products was about $13 billion.
Shareholders of Dow Chemical will get 1 share in the new DowDuPont for each Dow share, while DuPont shareholders will get 1.282 shares for each DuPont share.
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Liveris, 61, will oversee the materials science company, which will keep the Dow name after reorganization. The three companies will focus on agriculture, materials, and specialty products. Activist investors often put improving a company’s stock price ahead of workers needs and community investment. Dow was founded in 1897 as a bleach producer in MI. Seaford was home to DuPont’s first Nylon plant for many years, and House Minority Leader Dan Short, Republican of Seaford, tells Delaware1059…
