Following what would be structured as a merger of equals, the combined company could split.
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Dow’s chief executive Andrew Liveris and DuPont chief executive Edward Breen would take the two top jobs in the new company, Reuters reported sources saying.
The two companies, as of Wednesday, had a combined market value of more than $130 billion.
The proposed merger is likely to spark fears from farmers, especially in the United States, that a combination could lead to higher prices for seeds and agrochemicals.
A local advocacy group is calling the reported merger between Dow Chemical and DuPont a “roadblock” to justice.
More than US$4 trillion worth of deals have been since struck the beginning of this year, surpassing 2007 as the busiest year for acquisitions.
The next step being discussed would be to break up the merged company into three businesses: agricultural chemicals, speciality products, and materials, like plastics.
But both companies have been the target of activist investors, with Dan Loeb pressuring Dow to weigh a breakup and Nelson Peltz pushing a breakup of DuPont.
In August, the world’s largest seed company, Monsanto, abandoned a $45bn bid for rival Syngenta. Dow is also more exposed to the volatility of the energy market.
Compared to other peers in the Chemicals – Major Diversified sector, Dow Chemical hasn’t performed in terms of quarterly revenue growth year over year at -0.16 vs. the industry average of 0.09.
Dow has produced a slew of plastics and agricultural chemicals, while DuPont claims innovations such as Kevlar and Teflon.
Both companies are US institutions. DuPont was founded in 1802 by French immigrant E.I. DuPont, who established a gunpowder manufacturing operation along the Brandywine River in Wilmington, Del. Midland, Mich.-based Dow was founded by electrochemical pioneer Herbert Henry Dow in 1897.
Metals and oil producer Freeport-McMoRan jumped 10.5 percent as it announced further cuts to its capital budget and suspended its annual dividend in light of weak commodity prices. Dow, meanwhile, has gotten out of selling materials like chlorine and the epoxy used in everything from space travel to Ziploc bags.
Last month, Liveris said his company is exploring deal possibilities for its agriculture division, which had $7.3 billion in sales previous year.
“Everyone is talking to everyone”, the boss of Dow told investors in November. Dow avoided a potential proxy fight previous year by adding four independent directors to its board, giving seats to two Loeb nominees. At midday, the stock was at $56.04, up 10.1 percent.
In March, Dow said it would spin off a significant portion of its chlorine business to chemicals maker Olin Corp. In current market conditions, specialty chemicals are a growing business area, while the agrichemical industry has suffered losses in recent years. Many investors expect oil to fall below 2008 lows due to a global supply glut.
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The Dow Jones raced to a 191 point gain in the first hour at 17,759, helped by a near 11% gain for DuPont (NYSE:DD) on reports it is mulling a merger with Dow Chemical (NYSE:DOW).
