Thomson ReutersA view of the Dupont logo on a sign at the Dupont Chestnut Run Plaza facility near Wilmington, Delaware(Reuters) – U.S. chemical giants DuPont and Dow Chemical Co agreed to merge in an all-stock deal valuing the combined company at $130 billion, with plans to eventually split into three.
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Both companies operate globally and their invented products are so ubiquitous that they are known simply by their brand names, such Teflon, Ziploc bags, Saran Wrap, Kevlar and Nylon. Its present Chief Executive Officer (CEO) is Edward D. Breen. More than $4 trillion worth of deals have been struck so far this year, overtaking 2007 as the busiest year for acquisitions on record.
Dow and DuPont shares fell on Friday after soaring earlier in the week following reports of negotiations between the two companies.
The merger calls for Dow Chemical stockholders to receive one share of the company for each share they now own, while DuPont holders would exchange each of their shares for 1.282 shares of DowDuPont. Activist investor Nelson Peltz who has long championed breaking up stodgy conglomerates has been pressing DuPont to separate its agriculture nutrition and biosciences units from its building and safety materials divisions. The combined entity will be called DowDuPont.
Similarly, Dow has been pressured by hedge fund Third Point LLC, led by activist investor Dan Loeb, to split its specialty chemical and petrochemical businesses. The new board will include eight directors from each company. Both the companies need to merge first and then spinoff to qualify as tax-free transactions in America, affirmed SunTrust Robinson Humphrey analyst James Sheehan.
Liveris, 61, will become executive chairman of the company, which will be owned 50-50 by current shareholders of DuPont and Dow.
“This transaction is a game-changer for our industry”, Dow Chemical Chairman Andrew Liveris said in a statement.
Advisory Committees will be established for each business. Breen, 59, will oversee the other two divisions. “We don’t see much real significant overlap here, which is pretty incredible”, he said, adding that the combined agriculture business would be balanced between seeds and crop protection.
The material science company will comprise Dow’s Performance Plastics, Infrastructure Solutions, Performance Materials & Chemicals, and Consumer Solutions (besides the Dow Electronic Materials business), and DuPont’s Performance Materials segment.
In a separate announcement Dow Chemical said it would buy the remaining stake in its 50-50 joint venture with Corning Inc the supplier of Gorilla Glass for iPhones.
DowDuPont is estimated to have annual sales of around $83 billion, with a little more than $54 billion coming from Dow and just over $28 billion from DuPont. The market value is projected at $30 billion, however, for growth synergies, $1 billion is anticipated.
The proposed agriculture business would unite DuPont’s and Dow’s seed and crop protection businesses. Dow Automotive is a leader in thermoset plastics, which can not be remolded and are used in exteriors and “in-car” products, while DuPont’s automotive unit primarily focuses on thermoplastics, which soften when heated, and various “under the hood” products. Founded in 1897, Dow makes products that include Styrofoam, Liquid Armour, and carbowax.
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Information for this article was contributed by Randall Chase of The Associated Press; by Drew Harwell of The Washington Post; by Lydia Mulvany, Sara Forden and Patrick Gower of Bloomberg News; and by Leslie Picker and Michael J.de la Merced of The New York Times.
