Rubbertown shake-up: DuPont, Dow to merge

What has been rumored is now reality, DOW and DuPont are merging in one of the biggest mergers in the nation’s history. The three companies will focus on agriculture, materials, and specialty products.

The planned spin-off would occur in a second phase, when the combined entity would be divided into three separate companies dedicated to agriculture, material science and specialty products.

The deal, the largest ever in the chemicals industry, will create a $US130 billion company that combines products from both Dow and DuPont in the areas of agriculture, commodity chemicals and specialty products to create the new businesses.

“Over the last decade our entire industry has experienced tectonic shifts as an evolving world presented complex challenges and opportunities, requiring each company to exercise foresight, agility and focus on execution”, Liveris said.

Gov. Jack Markell (D-Delaware), in a statement Friday morning, committed to helping any DE workers affected by the DuPont cuts, and says he’ll work to keep the new company in the state. Mr. Breen said pursuing a merger was helped by the companies’ nearly equal market value.

The deal is one of the top 20 largest mergers. Dow chief executive officer Andrew Liveris, 61, will become executive chairman. It could take 18 to 24 months to split the companies in three because of the regulatory scrutiny this deal will face in the USA and other nations, the companies estimated. But I think the general feeling is there isn’t as much overlap in these product lines as you would expect.

Executives boast that the two companies have complementary offerings in packaging, especially in multilayered structures, where, for example, DuPont’s Surlyn resin might be used with Dow’s linear low-density polyethylene.

Want to be alerted before Jim Cramer buys or sells DOW? Notably, it produces Styrofoam insulation products and chlorine products and owns half of Dow Corning, a silicone products maker. The transaction is expected to yield more than $1 billion in additional annual EBITDA at full run-rate synergies.

In a separate announcement today, DuPont revealed a global cost savings and restructuring plan designed for 2016 to facilitate savings of $700m compared to 2015.

Investors will get one DowDuPont share for each Dow share, and 1.282 DowDuPont shares for each one of DuPont. Dow and DuPont shareholders will own about 50 percent, respectively, of the combined company. The proposed material science company would combine DuPont’s performance materials segment with Dow’s performance plastics, performance materials and chemicals, infrastructure solutions, and consumer solutions units, excluding its electronic materials business. Its combined revenue in 2014 was around $51 billion on an adjusted basis.

DuPont’s businesses would make up the bulk of this new company, with $11 billion in sales from electronics and communications, safety and protection, nutrition and health, and industrial biosciences. This transaction is a major accelerator in Dow’s ongoing transformation, and through this we are creating significant value and three powerful new companies.

After the details of the all share-swap deal were revealed, Dow Chemical lost 3.9 percent at $52.76, and DuPont gave up 5.8 percent at $70.25.