Dow, DuPont plan to merge

The chemical and agricultural industries are seeing a mega-merger; Dow Chemical (DOW) and DuPont (DD) announced Friday a deal valued at $130 billion.

Liveris will become executive chairman of the new company, while DuPont’s chief executive Ed Breen will be his CEO.

It is the intention of both companies’ boards of directors that, following the merger, DowDuPont would pursue a tax-free separation into three independent, publicly traded companies with each targeting an investment grade credit rating.

Breen will lead the integration and spin-off of the ag and specialty businesses, while Dow Chemical CEO Andrew Liveris, who will be executive chairman of DowDuPont, will lead the integration and spin-out of the chemicals-and-materials business.

DuPont’s safety and protection unit, which makes well-known brands such as Tyvek and Kevlar, is earmarked for this company as well. Dow also will assume full control of silicone products maker Dow Corning, its joint venture with Corning Inc.

“The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation”, SunTrust’s Sheehan said. Seaford was home to DuPont’s first Nylon plant for many years, and House Minority Leader Dan Short, Republican of Seaford, tells Delaware1059…

“DuPont and Dow are two titans of American industry and the proposed merger demands serious scrutiny”, he said.

The deal will likely face scrutiny by antitrust regulators.

“At one time we may have had 40,000 to 50,000 chemical workers spread throughout the Kanawha Valley”. The combined revenue for the materials business was about $51bn in 2014 on an adjusted basis.

“What we announced today with Dow Corning makes a science and materials powerhouse that is going to be based here”.

DuPont shares were down over 1 percent in early trading on Friday, while Dow’s were down over 4 percent. That’s above the price at which the company can convert Buffett’s $3 billion preferred stake into common stock that pays a lower dividend. The company, dubbed DowDuPont, will have dual headquarters in Midland, Mich., and Wilmington, Del.

But Breen said he and Liveris have created cost-cutting plans that should spare the most basic R&D, as well as sales teams. Investors will get one DowDuPont share for each Dow share, and 1.282 DowDuPont shares for each one of DuPont.

“The combined agro entity will surely become a formidable competition to the likes of companies like Monsanto, but the business and product overlap across their specialty businesses are very few”, says Deepak Karthikeyan, industry manager, Chemicals, Materials & Foods Practice, Frost & Sullivan.

DuPont’s agriculture business accounted for $9.2 billion of revenue in the first nine months of 2015, or 41 percent of total sales, according to data compiled by Bloomberg.

The materials company will fold in the automotive units of both Dow and DuPont, in addition to their performance-materials divisions and other units, to create a $51 billion-a-year company.

Prior to the merger, Dupont said in a statement it will slash $700 million in costs, with ten percent of its workforce “impacted” by the move, while Dow is expected to drop $300 million in costs.

The new board would have 16 members, with each company contributing eight directors.