Shares in both companies had risen since The Wall Street Journal reported on Tuesday that they were in merger talks. The companies explain that the merger will create a leader in thermoplastics, elastomers, finished parts and biopolymers, and result in the world’s largest packaging materials supplier.
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Deal making has been anticipated in the agriculture sector, and Dow and DuPont are making a move.
“The addition of a silicones position will expand our product offerings across multiple businesses while driving innovative solutions that will enable us to go deeper into key end markets by leveraging Dow’s existing, strong science and engineering competencies across new chemistries”, Liveris said in the statement. Its present Chief Executive Officer (CEO) is Edward D. Breen.
Dow Corning’s silicones business will join this company. Dow shares dropped 2%. The deal to combine two of the biggest and oldest U.S. chemical producers is a prelude to an eventual split-up of the combined company into three discrete businesses Dow and DuPont said on Friday.
Similarly, Dow has been under pressure from hedge fund Third Point LLC, lead by activist investor Dan Loeb, to split its specialty chemical and petrochemical businesses.
The deal “was always in front of us to get done, in the right way”, Dow Chief Executive Andrew Liveris, who has long pursued a tie-up with DuPont, said in an interview.
The new company would have dual headquarters in Wilmington, Del., and Midland, Mich.
Advisory committees led by Breen and Liveris will be established for each of the spinoff companies.
The split of three-ways will not occur for the next 18 to 24 months following the close of the deal, which is expected during the last six months of 2016.
The structure of the deal poses a particular challenge for regulators as the competitive landscape is reshaped, according to Allen Grunes, a former Justice Department antitrust lawyer now with Konkurrenz Group in Washington.
“We will continue to advocate that Delaware’s many advantages can be of major benefit to the new companies”, he said in a statement. About half of that growth is expected in the agriculture business, Fitterling said.
“These are highly complementary businesses”. Most of these savings, which are above the already-announced $1.7 billion worth of cost reductions announced by the two companies, would come from the agriculture and material sciences businesses. Both firms will look to cut costs and increase their respective positions in various markets.
“It’s clear there are some redundancies, but I don’t think they are as large as they could be if two other companies were merging”, said Wagner, who is now CEO of the ag technology company Agrinos in Davis, California. In addition, the companies announced separate restructuring steps. Employee and contractor layoffs will affect about 10 percent of the company’s workforce. It expects to record a pretax charge of about $780 million, with approximately $650 million of employee separation costs and about $130 million of asset-related charges and contract terminations.
Dow also said on Friday that it planned to restructure its ownership with Dow Corning by becoming a full owner, up from a 50-50 joint venture.
DuPont shares fell 5.1% in NY afternoon trading, as it also issued downbeat comments on its expected 2016 sales growth. With that share exchange ratio, DuPont shareholders would get $70.38 a share for their stock, or about $62 billion overall, based on Thursday’s closing prices.
Dow and DuPont shareholders will each own approximately 50 percent of the combined company, on a fully diluted basis, excluding preferred shares.
The proposed agriculture business would unite DuPont’s and Dow’s seed and crop protection businesses, which had combined pro forma 2014 revenue of about $19 billion.
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“We are creating the world’s leading agriculture company by bringing together DuPont’s unrivalled market access and industry-leading germplasm and breeding capabilities, and Dow strengths and traits and crop protection”.
