Dow, DuPont to combine in merger

USA chemical giants DuPont and Dow Chemical Friday announced their merger in an all-stock deal worth up to approximately 130 billion US dollars.

Regulators will be especially concerned about the agricultural sector, which could see big divestitures, antitrust experts said.

The companies confirmed plans to combine as DowDuPont, which would be followed by a separation into three independent companies focused on agriculture, materials science and specialty products.

The agriculture company, focusing on seeds and chemicals, would have a combined adjusted revenue of $19 billion, overtaking BASF as the leader in agrochemicals. It is headquartered in the central MI city of Midland, about 110 miles northwest of Detroit.

“Both Dow and DuPont had activist shareholders who had sought breakups of these companies, so ultimately the visions of these activists are being realized”, said James Sheehan, an analyst for SunTrust Robinson Humphrey.

Each company would stand on its own, but benefit from savings gained from being part of the larger entity, said Jim Fitterling, vice chairman and chief operating officer of Dow Chemical.

The deal, which is likely to face intense regulatory scrutiny, allows the new company – to be called DowDuPont – to rejig assets based on their diverging fortunes. Liveris in a statement called the deal “a game-changer for our industry” that will adjust the centuries-old corporations to the realities of the modern global chemicals business. Dow Corning is the largest silicone product manufacturer in the world.

It announced on Friday that it would buy the remaining stake in the Corning joint venture.

The companies hope to complete the deal in the second half of next year, and then pursue the three-way split-up of the new company in the following 18 to 24 months. Earlier this year, DuPont spun off money-losing chemical units into a new company, Chemours.

Another company would focus on material science, which is the heart of Dow Chemical’s current businesses.

Generally, it is agriculture and performance materials and chemicals where regulators will have to spend the most time looking at antitrust claims.

Dow shareholders would get 52% of the new company.

Dow’s presentation said that Dow Corning’s silicones business lies outside Corning’s three core technologies and four manufacturing and engineering platforms at the core of its strategy and capital allocation framework.

Dow AgroSciences, meanwhile, had global sales of $7.3 billion in 2014.

The business is expected to supply more than 40% of the corn seed market, and slightly less of the soybean seed market.

Andrew Liveris, Dow’s chairman and CEO, will lead the Material Science Committee. DuPont employs more than 60,000 people worldwide, while Dow has more than 50,000 employees.

Besides DuPont Nutrition & Health, the planned specialty products company also would include DuPont’s Industrial Biosciences, Safety & Protection, and Electric & Communications as well as the Dow Electronic Materials business.

The companies have two of the best-known names in American corporate history. The DowDuPont announcement may put pressure on other companies to combine.

“The (seed) market is already dominated by Monsanto”.

The US chemicals conglomerates on Friday revealed details of a merger, rumoured earlier this week, which will see the group initially combine into DowDuPont- a group with revenues of some $84bn a year, at 2014 values, and earnings before interest, tax, depreciation and amortisation of $15bn. “You’re nearly creating duopoly in the market, and that’s a problem”, she said. Evercore and Goldman, Sachs are advising DuPont.