DuPont and Dow Chemical shares surged in early trade Wednesday on news of talks on a possible mega-merger, lifting the Dow and the S&P 500.
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(NYSE:DD) and The Dow Chemical Company (NYSE:DOW) are in discussions to merge, creating one of the biggest chemical companies in the world.
If it does go through, the new company would become the world’s second largest chemical company behind BASF and surpass Monsanto Co.as the world’s largest seed and pesticide company, causing DuPont’s stock to be valued as much as $82 and Dow’s as much as $68. However, if the companies “can offer remedies that satisfy the Chinese regulators”, they could obtain clearance subject to conditions, Zhang said.
A potential deal could ease shareholder pressure on the two companies, strengthen their position amid weak demand for farm chemicals, but attract regulatory scrutiny in major markets including China.
Well Fargo & Co (WFC) has a almost market capitalization of $276.23 billion, and a total of 5.11 billion outstanding shares presently.
The combined company could split into material sciences, such as plastics used in packaging and vehicle engines, specialty products and agrochemicals, sources said, cautioning that plans were not final. The Dow Jones Industrial Average added 162.48 points, or 0.9 percent, to 17,730.48, with DuPont adding 56 points to the move.
This year has already been a tumultuous one for DuPont, whose former chief executive Ellen Kullman stepped down in October, about five months after winning a proxy battle waged by an activist investor.
Both Dow and DuPont declined comment on Wednesday.
Meanwhile, Dow Chemical has been jousting with activist investors, too. Just last week, Dow made a deal to sell part of its global herbicide business. But both men can count on support from mutual funds and midsize investment firms run by managers who want DuPont and Dow shares to rise fast, instead of waiting for research and development visions that might or might not lead to profits years ahead.
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. Though the deal would create a company with high market share in several businesses, the stand-alone entities would continue to face stiff competition, the people said. Dow’s chief executive Andrew Liveris is expected to be executive chairman of the new company, with DuPont chief executive Edward Breen keeping that title.
Also rising were shares of Chevron and those of Exxon Mobil, last up 1.9 percent and 1.6 percent respectively, helped by a reprieve in oil prices. Dow AgroSciences had global sales of $7.3 billion in 2014, or about 12.5 percent of revenue. DuPont has exited performance paints and coatings, including the business that invented Teflon nonstick pan coating. “There would be additional opportunities for further consolidation on the chemical side more broadly”, Stafford said.
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“Suppliers, customers and companies wanting to enter the market area are all facing a different set of competitors, with different assets and different incentives”, Grunes said.
