Combined, they would hold 41 percent of the USA corn seed business and 38 percent of the soybean market. The company produces a variety of polymers, composites, chemicals and bio-based fuels for automakers.
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According to that report, Liveris has pursued DuPont for more than 10 years, and he contacted Breen about a deal in October.
Now, as the shares of these companies are already up substantially on the merger rumors, how can investors play this news? If the merger is successful, it would create the second largest chemical company in the world in terms of revenue (BASF, which posts around $92 billion sales annually would remain the biggest).
But the size of the merged company would require regulatory approval in a number of their operating regions, including the United States, where it could run afoul of anti-trust legislation.
We rate DOW CHEMICAL (DOW) a BUY. The companies plan to bill the combined company as only a temporary vehicle to cut costs before splitting, and believe there is minimal antitrust overlap across those businesses.
“We would caution Dow Chemical and its stakeholders that DuPont still has not disclosed significant liabilities related to future C-8 litigation, Benzene, 171 remediation sites and other environmental liabilities”. Dow and DuPont “used to be the two big rivals in American chemicals, but they’ve gone down completely divergent paths”.
KEEPING SCORE: The Dow Jones industrial average rose 102 points, or 0.6 percent, to 17,668 at 11:24 a.m. Eastern time. DuPont’s stable of goods includes Kevlar fibers and Corian countertops, while Dow’s encompasses Styrofoam insulations and sunscreen chemicals. The DuPont Co. was founded in 1802 by French immigrant E.I. DuPont, who established a gunpowder manufacturing operation along the Brandywine River in Wilmington.
“For the last 10 years, the companies have not truly been competitors”, said Jonas Oxgaard, an analyst with Sanford C. Bernstein. Dow has produced a slew of plastics and agricultural chemicals, while DuPont claims such innovations as Kevlar, Tyvek and Teflon.
The news boosted stocks of both companies, which jumped as much as 12 per cent on Wednesday. The merger would combine two top suppliers of industrial and agricultural chemicals and crop seeds.
Dow Chemical and DuPont, two of America’s largest and oldest companies are in advanced-stage merger talks, it was reported late Wednesday. In November 2014, Dow agreed to give Third Point two nominees on its board.
DuPont, similarly, faced pressure from Nelson Peltz to separate its agriculture, nutrition and biosciences units from its building and safety materials divisions.
Last year, a former fraud investigator at Dow, Kimberly Wood, alleged that company money had financed vacations, sports junkets and other perks for Liveris and his family.
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DuPont and its financial partners may have less to gain from a merger than Dow, analyst Levenson concluded: “DuPont, for all its management turmoil and activist pressure, is a stronger credit than Dow, but any potential lift for Dow bondholders could be wiped out when the company is split up”.
