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.
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US antitrust enforcers will not look at the deal as a simply a combination of two conglomerates but examine the many products the companies make to determine where competition will be lost.
One motive for the merger is to cut costs. “And I think people sometimes underestimate the importance of that in the long term”, said Jim Fitterling. The all-stock deal would create a merged company valued at $130 billion.
In a presentation given to investors, Dow and DuPont stated that 70 percent of revenue in the Materials Science Company will be focused in three markets – packaging, transportation and construction.
Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware.
Here are key points of the deal between two of the biggest and oldest USA chemical producers, which had both faced pressure from activist shareholders to create more value. The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs.
Dow and DuPont said the combined company will generate huge savings and strengthen their competitive positions in a world economy beset with overcapacity and low commodity prices. The material science company would combine DuPont’s performance materials segment with Dow’s performance plastics, performance materials and chemicals, infrastructure solutions, and consumer solutions units, excluding its electronic materials business.
Prior to the merger, Dupont said in a statement it will slash $700 million in costs, with ten percent of its workforce “impacted” by the move, while Dow is expected to drop $300 million in costs. Together, they would form the second-largest chemical company world-wide.
“Just a handful of large chemical companies including Dow and DuPont already control most of the seed supply used to grow crops like corn and soybeans, as well as the herbicides that genetically engineered seeds are created to be grown with”, she said.
The third business, selling seed and crop protection chemicals, generated adjusted revenue of about $19 billion. Liveris will take the title of executive chairman of the DowDuPont board of directors.
“I’ll be listening to Iowa farmers and consumers about any concerns they may have with this proposal, and the Judiciary Committee will be exercising its appropriate oversight function”, Grassley said.
The companies aim to achieve the split into three within two years of the completion of the merger. If the Dow/Dow Corning deal closes first, it will join Dow, and then become part of DowDuPont.
DowDuPont’s board is expected to have 16 members, with each company contributing eight directors, the companies said.
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.
Wagner, the former Dow Agro R&D leader, said there may be redundancies in the field staffs of the two companies that run trials on new products or that handle the regulatory issues involved in bringing new products to market.
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The Wall Street Journal first reported this week that DuPont and Dow were planning a merger.
