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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DuPont and The Dow Chemical Company today announced that their boards of directors unanimously approved a definitive agreement under which the companies will combine in an all-stock merger of equals.
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.
The two companies will form DowDuPont, then separate into three independent publicly traded companies focused on agriculture, material science and specialty products.
The companies aim to achieve the split into three within two years of the completion of the merger. Dow’s Chief Executive Officer Andrew N. Liveris will serve as executive chairman of the new firm. Dow also will assume full control of silicone products maker Dow Corning, its joint venture with Corning Inc. Nor are Dow and DuPont making any promises that antitrust regulators will approve the deal. Each of the businesses will have clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages, and focused investments in innovation to better deliver superior solutions and choices for customers.
Dow Automotive ranks No. 72 on the Automotive News list with $2.8 billion in sales to automakers past year.
U.S. stocks finished firmly lower on Wednesday (Dec 9) following a volatile session as merger talks between Dow Chemical and Dow member DuPont limited the Dow’s decline.
“The combined agro entity will surely become a formidable competition to the likes of companies like Monsanto, but the business and product overlap across their specialty businesses are very few”, says Deepak Karthikeyan, industry manager, Chemicals, Materials & Foods Practice, Frost & Sullivan.
DuPont, based in Wilmington, also said Friday that even before the merger, it will displace around 5,400 of its 54,000 global employees. Dow would being about $45 billion in net sales to this new company, while DuPont would bring about $6 billion.
The all-share deal, which could spark further industry consolidation, will combine two of the biggest and oldest United States chemical producers and is a prelude to an eventual split-up of the combined company into three discrete businesses, Dow and DuPont said. After preferred shares are converted, Dow shareholders will own 52 percent of DowDuPont.
Another activist investor, Dan Loeb, has been pushing Dow to split its agri business and other speciality chemical units from its petrochemical divisions. Combined pro forma 2014 revenue for Specialty Products is about $13 billion.
That throws into significant doubt what will happen to the 1,500 people who work at the Dow AgroSciences LLC headquarters on the northwest side of Indianapolis, especially since Dow and DuPont executives said they plan to achieve $1.3 billion in cost savings from merging their respective ag units.
Breen, on a conference call with investors, noted that about $300 million will be cut from research and development operations, with most of that occurring in the agriculture business.
DuPont, founded in 1802, was famed for developing explosives and nylon. Combined pro forma 2014 revenue for Agriculture is approximately $19 billion.
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Shares of The Dow Chemical Co., based in Midland, Michigan, rose nearly 11 percent to $56.40 in afternoon trading after hitting an all-time high of $56.88 earlier in the day.
