Dow Chemical, DuPont agree to merge

It would also be good for farmers, according to King, as the deal calls for one of the companies to be dedicated to agricultural business.

Dow and DuPont shares fell on Friday after soaring earlier in the week following reports of negotiations between the two companies.

“We are creating the world’s leading agriculture company by bringing together DuPont’s unrivalled market access and industry-leading germplasm and breeding capabilities, and Dow strengths and traits and crop protection”.

The combination will help the companies save about $3 billion in costs in the first two years, with the possibility of saving another $1 billion, Dow and DuPont said. The companies, said an analyst, need first to merge so subsequent spins off qualify as being transactions that are tax free in the U.S.

Dow and DuPont will combine in an all-stock deal to create a new company, DowDuPont, with a market capitalization of about $130 billion, they said Friday in a joint statement. The agreement includes a $1.9 billion termination fee under specified circumstances, such as rejection by shareholders.

“Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees”, Breen added. Analysts also expect selloffs in the chemicals segment. DuPont was founded in 1802 in Delaware. “We may see more consolidation”.

DuPont, which is 213 years old, makes products used in petrochemicals, pharmaceuticals, food and construction.

Since their founding in the 19th century, both companies have researched and produced a sweeping variety of now-ubiquitous chemicals, including the Kevlar in bulletproof vests and the Teflon in nonstick pans, as well as chlorine, Saran Wrap and Ziploc bags.

Dow Chemical has produced plastics, chemicals, hydrocarbons, and agrochemicals for 118 years.

Dow said it would take full ownership of Dow Corning Corp., which it jointly owns with Corning Inc.

The deal, which the companies expect to close in the second half of 2016, is sure to be closely scrutinized by regulators. In addition, the companies announced separate restructuring steps. It kept Dow’s ratings at Baa2 and outlook stable. It will be the sales leader in the sector, ahead of rivals Monsanto and Syngenta.

This merger, which is one of the biggest for this year, would give DuPont and Dow the ability to rejig assets based up the diverging of fortunes.

DuPont and Dow Chemical, which both have operations in the United Kingdom, have agreed to merge in a deal valuing the enlarged firm at £85billion.

Dow is much stronger in chemicals and plastics, while DuPont is a much larger leader in specialty products.

Executives billed the deal as a merger of equals.

“When I look at DuPont and Dow, I see businesses that fit together like hand and glove”, Breen said. Dow employs about 6,000 people in the Houston area. They said it would spawn a trio of companies that are bigger and more focused, and therefore better able to navigate current challenges.

“It’s hard to know whether the fixes would work”, said John Taladay of law firm Baker Botts LLP.

“You’re nearly creating duopoly in the market, and that’s a problem”, Ms. Moss told Reuters. Dan Loeb’s Third Point hedge fund targeted the company’s failure to meet some financial targets, and urged Dow to split its petrochemicals and specialty-chemicals businesses. Evercore and Goldman, Sachs are advising DuPont.