Dow Chemical Takes 100 Percent Stake in Dow Corning Venture

The deal announced Friday is being billed a merger of equals, to be called DowDuPont.

Dow Chemical shareholders will get one DowDuPont share for each Dow Chemical share they hold, while DuPont shareholders will get 1.282 shares in DowDuPont for each DuPont share they own.

Dow Chemical and DuPont said that the creation of the world’s biggest agrichemicals and seeds company, stemming from their $130bn merger, would be created with only minor risk of the concentration of market powers which trigger antitrust concerns.

Two of America’s oldest and most important industrial companies are tying the knot.

Even in those markets, Dow and DuPont compete against large rivals like Syngenta AG, Monsanto Co. and Bayer AG, Miner said.

The Wall Street Journal first reported this week that DuPont and Dow were planning a merger. Dow Chemical fell 2.8% to $53.37 in NY. Former DuPont CEO Ellen Kullman abruptly resigned in October just a few months after successfully fending off a proxy challenge by Trian Fund Management a hedge fund led by activist investor Nelson Peltz.

Another activist investor, Dan Loeb, has been pushing Dow to split its agri business and other speciality chemical units from its petrochemical divisions. Meanwhile the two companies have undertaken significant cost-cutting efforts in recent years amid increased shareholder pressure to boost profits and improve margins. The merger is the largest ever in the chemicals industry. Monsanto’s $45-billion offer for Swiss-based Syngenta was dropped in August. “And I think people sometimes underestimate the importance of that in the long term”, said Jim Fitterling.

DuPont Chief Executive Ed Breen will be CEO of the new company, and Dow Chemical CEO Andrew Liveris will be executive chairman. The company, dubbed DowDuPont, will have dual headquarters in Midland, Mich., and Wilmington, Del. “We have talked about the great business environment in DE and the many talented scientists, engineers and business leaders who call DE home and who can be at the center of growth for the three new businesses”, said Markell. After the deal’s expected closure in 2nd-half 2016, the company will split into 3 separate publicly traded businesses.

“We did not take out anything that could help these companies for growth in the future”, Breen said. The agriculture sector will likely receive the most scrutiny.

“These are highly complementary businesses”.

USA antitrust enforcers will not look at the deal as simply a combination of two conglomerates but examine their many products to determine where competition will be lost.

The New York investment firm said it was approached by the companies to “assist in negotiations”, including on structure and governance of the combined entity and the planned spinoffs.

The companies anticipate $300 million in cost synergies here. DuPont expects to record a pretax charge of about $780 million, with approximately $650 million of employee separation costs. Dow has 500 employees in DE, so streamlining will be necessary.

Seeds and chemical maker Dow Chemical Co said it would buy the remaining stake in its joint-venture with Gorilla glass maker Corning Inc.

Dow and DuPont said the combined company will generate huge savings and strengthen their competitive positions in a world economy beset with overcapacity and low commodity prices. It will combine Dow’s plastics business, a leader in polyethylene and elastomers, with DuPont’s materials unit, which makes engineering polymers and ethylene copolymers.

The merger will result in a combined market capitalization of $130 billion.

The specialty products company would combine DuPont’s nutrition and health, industrial biosciences, safety and protection, and electronics and communications segments with Dow’s electronic materials business.

The companies will consist of an “Agriculture Company”, “Material Science Company”, and “Specialty Products Company”.