Dow Chemical Co. and DuPont Co. announced a merger that would fuse two stalwarts of American industry into a giant worth about $130 billion and would reshape the chemical and agricultural industries.
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Job reductions are expected to result from the merger.
The transaction is billed as a merger of equals, although by revenues, Dow – at $58 billion in 2014 – is much bigger than DuPont, at $35 billion past year.
DuPont will cut staff by 10 percent following the merger, Industry Week reports.
DuPont’s automotive unit ranks No. 64 on Automotive News’ list of the top 100 global suppliers with an estimated $3 billion in worldwide sales to automakers in 2014.
The two companies are longtime blue chip stars of United States industry.
The three-way split into material sciences, specialty products, and seeds and agrichemicals, is likely to occur 18 to 24 months after the merger deal closes.
Dow Chemical shareholders will get one DowDuPont share for each Dow Chemical share they hold, while DuPont shareholders will get 1.282 shares in DowDuPont for each DuPont share they own. Activist investors often put improving a company’s stock price ahead of workers needs and community investment. DuPont this year had narrowly prevailed over Nelson Peltz, whose firm, Trian Fund Management, had pressed for months for seats on the chemical maker’s board.
King notes the merger would bring Dow’s fertilizer business into the products already offered at DuPont Pioneer.
“That’s when the downsizing, the selling off of businesses, the changing of portfolios started”, he says.
Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion. Other former DuPont divisions or affiliates that are now separate companies based in the Philadelphia area include Axalta, Endo, and Incyte.
Even in those markets, Dow and DuPont compete against large rivals like Syngenta AG, Monsanto Co. and Bayer AG, Miner said.
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. On a pro-forma basis, their combined revenue would be $83 billion, according to a presentation Friday.
There’s been widespread speculation this year about potential consolidation in the agriculture industry as lower crop prices curb farmer spending, pressuring company earnings. Specialty products, encompassing electronics, nutrition, industrial biosciences and safety, would have revenue of about $13 billion.
Andrew N Liveris will be named Executive Chairman and Edward D Breen will be named CEO of combined company. Dow avoided a proxy fight previous year by adding four independent directors, giving board seats to two Loeb nominees. Among the reasons mergers of equals are rare is that they require high-powered executives to share power. Dow and DuPont shareholders will own about 50%, respectively, of the combined company. Dow chief executive Andrew Liveris will become executive chairman of the new company, DowDuPont, while DuPont’s CEO Ed Breen will be his CEO. It said on Friday it would buy the remaining stake in the joint venture from Corning Inc.
Dow harks back to 1897, after Herbert Henry Dow discovered a new way to extract the element bromine – then a useful ingredient in medicine and photographic materials – from brine located in wells around Midland, Michigan, its current base.
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DuPont, founded in 1802, was famed for developing explosives and nylon.
