DuPont plans 10% workforce cut in Dow merger

DuPont Chief Executive Ed Breen will be CEO of the new company, and Dow Chemical CEO Andrew Liveris will be executive chairman.

Chemical giants DuPont and Dow tapped two law firms that have been at the helm of several of the year’s largest deals to help steer their all-stock merger of equals, which stands to create a $130 billion company that will be split into three separate businesses.

Nelson Peltz, an activist investor who has been prodding DuPont to break up, and Daniel S. Loeb, who has been doing the same for Dow, have yet to weigh in on the merger.

Dow Chemical said in a separate statement that the Dow Corning deal will add to earnings per share and cash flows and yield more than $1 billion in annual earnings before interest, taxes, depreciation and amortization.

“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.

Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware.

Dow shareholders would own 52 percent of the new company after preferred shares are converted, while DuPont investors would own the remaining 48 percent, the companies said.

Breen told analysts that the two companies would fit together like “hand in glove” with little product overlap.

King said regulators will take a close look to determine whether it’s anticompetitive and he said the architects of the plan likely kept that in mind as they drew up plans for the three distinct businesses that will ultimately results. This would occur as soon as feasible, which is expected to be 18-24 months following the closing of the merger, subject to regulatory and board approval.

DuPont and Dow Chemical, with more than three centuries of history between them, have agreed to merge in one of the biggest deals of the year.

Today, most of their business is in selling the critical building blocks for the insulation of homes, the production of cars and the planting and harvesting of worldwide farms. Senate Judiciary committee Chairman Chuck Grassley said in a statement Friday that the proposed merger “demands serious scrutiny”.

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.

Dow, meanwhile, said it is taking full ownership of Dow Corning, now a 50-50 joint venture between Dow and Corning. While the combined DowDuPont’s auto division will account for only a small fraction of the company’s business, the merger’s ripple effects run deeper into the second and third tiers of the supply chain, which often use materials from both companies in various auto parts and components. The combination of complementary capabilities will create a low-priced, innovation-driven leader that can provide customers in high-growth, high-value industry segments in packaging, transportation, and infrastructure solutions, among others with a broad and deep portfolio of cost-effective offerings.

By market valuation, though, the more profitable DuPont is slightly larger, $62 billion versus $61 billion for Dow.

The planned agriculture company would combine the seed and crop protection businesses of DuPont and Dow.

The three new businesses would focus on agricultural products includingherbicides and genetically modified seeds, commodity chemicals including plastics, and specialty chemicals such as those used in solar panels.