Two of the oldest names in U.S. industry, Dow Chemical (Hanover: DCH1.HA – news) and DuPont, announced Friday that they will merge to create the world’s biggest chemical and materials company.
Advertisement
Following the closing of the transaction, the new company, DowDuPont, will be dual headquartered in Midland and Wilmington, Del.
The planned split would create businesses focused on farming, materials and specialty products and it is to be called DowDuPont. It will combine Dow’s plastics business, a leader in polyethylene and elastomers, with DuPont’s materials unit, which makes engineering polymers and ethylene copolymers.
Agriculture: “Leading global pure-play agriculture company that unites DuPont’s and Dow’s seed and crop protection businesses”.
The specialty products company would combine DuPont’s nutrition and health, industrial biosciences, safety and protection, and electronics and communications segments with Dow’s electronic materials business.
Dow Chemical shareholders would receive one share in the combined company for each Dow share, while DuPont shareholders would receive 1.282 shares in DowDuPont for each DuPont share.
Dow Chemical CEO Andrew Liveris will become executive chairman of the new entity, while DuPont CEO Edward Preen will become chair and CEO.
The plan will involve job cuts, said the United States chemical group, with around 10% of DuPont’s global workforce to be impacted.
The deal, which the companies expect to close in the second half of 2016, is sure to be closely scrutinised by regulators. Combined pro forma 2014 revenue for Material Science is approximately $51 billion.
“I wouldn’t say tight, but maybe tighter than it [typically] would be for a deal this size just because it is going to be done as a merger of equals, so we’ll have to see where it shakes out”. If it closes before the DuPont deal it brings it into Dow. But according to a Reuters report, the two companies have agreed to merge but also plan to divide assets soon after into three divisions: agriculture, materials and specialty products. “It will probably be able to be played from both ways, either being long the Dow and short the DuPont or vice versa”, he explained.
Numerous deals reflect companies’ desire to step up growth by giving them added market share, new products or expanded geographic reach.
DuPont chief executive Ed Breen said the “merger of equals” will create significant value in the immediate period.
Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion.
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.
Advertisement
Dow’s financial advisers on the deal are Klein & Co, Lazard and Morgan Stanley while its legal adviser is Weil, Gotshal & Manges LLP.
