The company would then break into two or three businesses for antitrust reasons, the people said. The possible merger of the companies may see cost synergies to the tune of US$3 billion, CNBC said, citing informed sources.
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According to their reports, the talks were at an advanced stage and a deal could be announced this week, although there was no guarantee that a tie-up would be agreed. The matter is closed, the company says. In his view, ultra-low oil prices will drive down supply, while demand will continue to grow.
More than US$4 trillion worth of deals have been since struck the beginning of this year, surpassing 2007 as the busiest year for acquisitions.
Before any breakup, the deal would create a giant with more than $90 billion in combined sales and strong positions in everything from plastics to industrial chemicals and agriculture.
In the years since, the two companies expanded into a wide range of specialty and commodity chemical operations resulting in a variety of iconic products, from the Ziploc sandwich bags and Saran wrap developed by Dow to Dupont’s Teflon coatings and Kevlar body armor. Energy companies and suppliers of raw materials, heavily sold this year, rose sharply along with the price of oil and other commodities. Dow shares soared 12 percent after news of the potential merger, which would be the largest in the chemical industry.
A deal could prompt Monsanto to try again with a bid for Syngenta after it abandoned its $46bn offer for the Swiss pesticide and seeds company earlier this year, they add.
Midland, Mich.-based Dow (with about $50 billion in annual sales) and Wilmington-based DuPont ($30 billion in annual sales), which are frequent competitors, both face declining farm sales and increased competition from rival manufacturers in China and other emerging markets. At 10:48 a.m. ET (1548 GMT) the Dow Jones industrial average was up 176.51 points, or 1 per cent, at 17,744.51, the S&P 500 was up 14.22 points, or 0.69 per cent, at 2,077.81 and the Nasdaq Composite was up 4.18 points, or 0.08 per cent, at 5,102.43.
DATA WATCH: Later in the day, the U.S. Labor Department reports on the number of people who applied for unemployment benefits last week.
A Dow and DuPont merger “makes it more likely that Monsanto re-approaches Syngenta”, Bernstein analysts including Jonas Oxgaard wrote in a note Wednesday. Both companies have long histories as specialty chemical companies. We feel its strengths outweigh the fact that the company shows low profit margins. Dow, meanwhile, has gotten out of selling materials like chlorine and the epoxy used in everything from space travel to Ziploc bags.
“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. This presents a solid downside to the current price of the equity.
Dow has also had an activist investor. Last year, Dow settled a brief but bitter dispute with Daniel S. Loeb, the billionaire who runs the hedge fund Third Point, by adding four independent directors. Here’s what investors in DOW stock and DD stock need to know.
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In March, Dow said it would spin off a significant portion of its chlorine business to chemicals maker Olin Corp.
