“While we will no longer receive equity earnings or dividends from Dow Corning’s silicones business, we are confident that Hemlock and deployment of the new entity’s $4.8 billion will create significant value for our shareholders, including EPS accretion”, R. Tony Tripeny, Corning chief financial officer, said in the statement. WSJ’s David Benoit reports. As the third and fourth largest chemical companies in the world, and the two biggest in the United States, claims of monopoly will abound.
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Dow Chemical and DuPont have officially announced they will merge after a series of meetings.
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The three new businesses would focus on agricultural products including herbicides and genetically modified seeds, commodity chemicals including plastics, and specialty chemicals such as those used in solar panels. The Wall Street Journal reported Tuesday that the companies were planning to merge and then split into three companies focused on agriculture specialty chemicals and materials. “I’m not naive about what’s going on in the ag space right now” DuPont CEO Edward Breen said in an October analyst call.
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DuPont expects 2016 sales growth to be “challenging”, due to economic weakness inagriculture and emerging markets. DuPont expects to lay off roughly 10 percent of its global workforce as a result of the consolidation.
In conjunction with the merger, both companies are taking steps to restructure the business.
Dow has strength in soybeans, while DuPont is strong in corn.
“They’ll be able to make, probably, better investments”.
Andrew Liveris, now chief executive of Dow, will be executive chairman of the new company, while DuPont chief executive Ed Breen will be the new chief executive. The companies plan to maintain dual headquarters in Midland, Michigan, and Wilmington, Delaware, but also said they will “optimize” their physical footprint.
A copy of the investor presentation will be made available on both companies’ Investor Relations websites.
One rarity in this merger – shareholders will hold 50 percent of both companies’ stocks and the board will be split equally between representatives from both companies. Iowa Republican Senator Chuck Grassley said in a statement combining two titans of American business would require “serious scrutiny” from regulators. Some of the two corporations’ products are very complementary and are not in direct competition with one another. For example, Dow sells solar shingles and DuPont sells an adhesive for solar panels.
Dow, meanwhile, said it is taking full ownership of Dow Corning, now a 50-50 joint venture between Dow and Corning. Executives estimate the combined firm will achieve $3 billion in savings as well as $1 billion in growth synergies. The new company would be worth $19 billion, based on the units’ combined 2014 revenue.
The companies said the proposed merger will result in cost synergies of about $US3 billion. Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share.
Nonetheless, the announcement – which will see Dow shareholders take over 52% of the combined company, and DuPont investors 48% – failed to support the companies’ shares, which had already risen in anticipation of the tie-up.
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Besides DuPont Nutrition & Health, the planned specialty products company also would include DuPont’s Industrial Biosciences, Safety & Protection, and Electric & Communications as well as the Dow Electronic Materials business. Combined pro forma 2014 revenue for Specialty Products is approximately $13 billion. “The state is committed to supporting those affected by DuPont’s cost cutting in DE”.
