In conjunction with the proposed merger, which is subject to regulatory approval, both companies are taking separate restructuring steps. With respect to the proposed merger, we anticipate that we will have an opportunity to submit comments regarding the effect this merger may have on agricultural research, innovation, grain marketing, and the competitive pricing of farm inputs. The companies say the deal would save them at least $3 billion over the first two years of the merger. 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”. “To be able to do that is not easy”, said Liveris.
Advertisement
DuPont said it expects 10 percent of its 63,000-strong global workforce will be “impacted”, and the company is budgeting for $650 million in “employee separation costs”.
Credit rating agency Moody’s reaffirmed its A3 rating for DuPont, but changed its outlook to negative, citing among other factors the complexities of combining the agricultural businesses. Dow shares dropped 2%. These are two of the largest chemical companies on the market, and they are looking to form a $130 billion market cap powerhouse of a company.
A deal would be one of the biggest in a year marked by big deals.
Dow Chemical shareholders will get one DowDuPont share for each Dow Chemical share held, while DuPont shareholders will get 1.282 shares in DowDuPont for each DuPont share they own.
The new company, DowDuPont, will be owned 50-50 by the current shareholders of both companies.
Former DuPont CEO Ellen Kullman abruptly resigned in October, just a few months after successfully fending off a proxy challenge by Trian Fund Management, a hedge fund led by activist investor Nelson Peltz. “This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers”.
Executives boast that the two companies have complementary offerings in packaging, especially in multilayered structures, where, for example, DuPont’s Surlyn resin might be used with Dow’s linear low-density polyethylene. “This deal had to be had to create value for shareholders”.
DowDuPont Board of Directors will have 16 directors, consisting of eight current Dow directors and eight current DuPont directors.
As soon as possible (in the next 18-24 months) Liveris and Breen will break up the massive company into three independent, publicly-traded companies.
Mr. Breen told analysts that the three-way breakup would likely be a one-off event, rather than spinning off the units at different times.
It’s been a bumpy 2015 for DuPont, whose legacy reaches back to 1802 when E. I. du Pont built a series of gunpowder mills along the banks of the Brandywine River near Wilmington, Delaware, where the company is still based. The merger likely would result in significant job cuts because of overlapping businesses.
DuPont announced a plan that is expected to reduce costs by $700 million in 2016 compared to this year.
Advertisement
And they said an extra $1bn should also be generated from growth synergies. The transaction is expected to yield more than $1 billion in additional annual EBITDA at full run-rate synergies.
