United States chemcial giants to merge in $195b deal

Executives billed the deal as a merger of equals. They also emphasized that the combination and restructuring would avoid taxes, adding to the benefit for shareholders.

DuPont’s ag business, much of which operates under the Pioneer brand, is larger than Dow Agro. “We believe this is the right way”.

It will have dual headquarters in Wilmington, Delaware, now DuPont’s home town, and Midland, Michigan, where Dow has its headquarters.

Oxgaard said there are a few areas of overlap – both sell corn seed, for example – where divestitures might be necessary. Major competitors would be Germany’s BASF, Honeywell and 3M. “ASA looks forward to the opportunity to provide comments to the companies and USA regulatory authorities that must approve any merger, and will continue to study how this merger will affect soybean farmers”.

DuPont is no stranger to mergers and spin-offs. “GAME-CHANGER” DuPont, which is 213 years old, makes products used in petrochemicals, pharmaceuticals, food and construction. Mr. Liveris said planned cost reductions wouldn’t “hobble” the companies’ research capabilities. Iowa Republican Senator Chuck Grassley said in a statement combining two titans of American business would require “serious scrutiny” from regulators.

Dow and DuPont shares fell on Friday after soaring earlier in the week following reports of negotiations between the two companies. Dow shares dropped 2%. M&A activity in 2015 hit a record $4.6 trillion as of Monday, according to Dealogic.

Under the terms of the merger, Dow shareholders will receive a fixed exchange ratio of one share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share.

Nonetheless, the announcement – which will see Dow shareholders take over 52% of the combined company, and DuPont investors 48% – failed to support the companies’ shares, which had already risen in anticipation of the tie-up.

“Overall, this transaction represents a tectonic shift in an industry that has been evolving over the last many years”, said Dow Chairman and Chief Executive Officer Andrew Liveris, calling the merger a seminal event for employees and customers of the two companies, which have a combined workforce of more than 110,000 people. SunTrust’s Sheehan said that they can witness the biggest impact of the merger in the agriculture market.

“That always makes for quicker, easier negotiation”, Mr. Breen said.

Breen said on CNBC that Peltz was “very supportive” of the Dow deal. “The strategic nature of what we could pull off is incredible”.

The material science company would consist of DuPont’s Performance Materials segment as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer solutions (excluding the Dow Electronic Materials business) operating segments.

For Liveris at Dow, “this has been a long journey”, he told analysts. If the DowDuPont deal closes first, Dow Corning would join the new company when the subsequent deal wraps up. “I do want to eventually go to the place where the future of the company is not just beholden to my presence”, he said on the conference call. Presently, both are struggling to compete with their agriculture divisions, which DuPont was even considering selling.

While DuPont argued that its stock had outperformed traditional measures like the Standard & Poor’s 500-stock index, Trian argued that the company had not cut enough costs and repeatedly missed financial performance targets. DuPont said it expects sales growth next year to be “challenging”.

Dow said it is taking full ownership of Dow Corning, now a 50-50 joint venture between Dow and Corning.

Additional upside of approximately 1 billion dollars is expected from growth synergies. The executives anticipate the merger transaction to close in the second half of 2016.