The agriculture company, focusing on seeds and chemicals, would have a combined adjusted revenue of $19 billion, overtaking BASF as the leader in agrochemicals.
Advertisement
However, the aim is, 18-24 months after the merger is completed, to separate out the combined Dow-DuPont businesses into three spin-offs – in agriculture, materials science, and speciality products.
The union, if approved, would mark the end as independent entities of two of America’s oldest corporations: DuPont, founded in 1802, and Dow, started in 1897.
Each company has posted three straight quarters of falling revenue, spurred by the strong dollar and plummeting commodities prices.
The deal appears to be a rare example of a true merger of equals.
The three companies would focus on agriculture, materials and speciality products.
“For DuPont, this is a definitive leap forward on our path to higher growth and higher value”, DuPont Chairman Edward Breen said in a statement. “We believe the likely place we will see some divestitures is in herbicides”, he wrote.
“Overall, this transaction represents a tectonic shift in an industry that has been evolving over the last many years”, said Dow chairman and CEO Andrew Liveris, calling the merger a seminal event for employees and customers of the two companies, which have a combined workforce of more than 110,000 people.
The combined firm will have dual headquarters in Midland, Mich., and Wilmington, Del., where Dow and DuPont, respectively, are now based. The leadership and location of the three eventual companies hasn’t been decided.
The merger however triggered worries that it will give the company oligopolistic powers in areas like seeds for farmers and certain chemicals. Notably, it produces Styrofoam insulation products and chlorine products and owns half of Dow Corning, a silicone products maker.
Dow, which has 51,000 employees worldwide, has yet to announce layoffs related to the merger, yet the company has number of facilities and products that overlap DuPont offerings. Companies have agreed to more than $4 trillion in deals this year across the world, including more than $2 trillion in the US, data from researcher Dealogic show.
The DuPont-Dow Chemical deal is subject to regulatory approval. Mr. Breen said in the interview that the companies plan to divest only minor pieces of their businesses “but nothing that would move the needle”.
Friday’s announcements will include major job cuts. The agriculture sector will likely receive the most scrutiny.
DuPont shares fell 5.4 percent to $70.56 in midday trading.
The deal comes amid a record year for mergers and acquisitions announced by USA companies.
The material science company would consist of DuPont’s Performance Materials segment as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer solutions (excluding the Dow Electronic Materials business) operating segments.
Advertisement
“Consolidation in the ag industry is a natural step and this [Dow-DuPont] transaction is the most logical and compelling combination”, he said. Mr. Breen said pursuing a merger was helped by the companies’ nearly equal market value.
