Dow, DuPont ‘giga-merger’ to create $130B chemical giant

In what one analyst called the “deal of three centuries”, Dow Chemical and DuPont said Friday they are merging to create the world’s largest chemical company worth $130 billion.

The combined firm will have dual headquarters in Midland, Mich., and Wilmington, Del., where Dow and DuPont, respectively, are now based.

After merging as part of the all-stock deal, DowDuPont will then split up into three independent, publicly traded companies after cutting out about $3 billion in costs. The Materials Science Company will be led by Liveris and will include Dow’s Performance Plastics, Performance Materials & Chemicals, Infrastructure Solutions, and Consumer Solutions, and DuPont’s Performance Materials segment. “For instance, electronic and display materials is an area where the companies can potentially experience cost benefits and increased market penetration, while other markets such as safety, where Dow is not active, will not see much change”.

Dow and DuPont shareholders will each own approximately 50% of the combined company, on a fully diluted basis, excluding preferred shares.

Dow Chemical CEO Andrew Liveris will become executive chairman of the new entity, while DuPont CEO Edward Preen will become chair and CEO. DuPont expects to cut 10% of its global workforce ahead of the combination with further job cuts likely as the combined company gets leaner ahead of the planned three-way split. Last year’s combined revenue from the two companies was about $51 billion. If the DowDuPont deal closes first, Dow Corning would join the new company when the subsequent deal wraps up. DuPont is one of the 30 stocks in the Dow Jones industrial average, and its decline helped drive the blue-chip average lower by 286 points Friday morning, to 17,288.20. About half of that growth is expected in the agriculture business, Fitterling said.

The Pesticide Action Network calls Dow, Dupont, BASF, Monsanto, Syngenta, and Bayer the ‘Big 6’ of the seed, pesticide, and biotechnology industries.

In May, DuPont CEO Ellen Kullman won a proxy battle waged by Trian Fund Management, the activist investor co-founded by Nelson Peltz, which said a breakup of the company would save billions of dollars in costs. The product overlap isn’t extensive and the focus will probably be on seeds and crop chemicals, said Jason Miner, an analyst at Bloomberg Intelligence.

The newly-created agriculture business is forecast to generate $19bn in sales a year, while material sciences will have a turnover of $51bn and specialty products $13bn. Revenue estimates place its value at $13 billion.

The new company’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors. Dow said closing is expected by mid-2016 and that Dow Corning will continue to operate as a separate, active business.