Dow Chemical, DuPont Reach Deal on Merger

In addition to getting approval from investors, the deal must also get approval from government regulators in the USA and other countries.

DuPont and Dow shares were down on Friday after earlier this week soaring on speculation of the merger.

Some national farm leaders met the announcement with quizzically, if not skeptical, eyes, and hoped farmer groups will have the opportunity study and then comment on how such a merger of two large agricultural seed and agrichemical providers might impact US farmers.

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

Possible tax savings ended up being one reason for this complicated merger prior to a break up, said analysts.

The Dow-Dupont deal is a rare combination of equals, rather than a straight purchase – the stock ratio is calculated so that all shareholders of each component company will come away owning half of the new entity. DuPont this year had narrowly prevailed over Nelson Peltz, whose firm, Trian Fund Management, had pressed for months for seats on the chemical maker’s board.

Edward Breen, chairman and CEO of DuPont and Andrew Liveris, president, chairman and CEO of Dow. “We may see more consolidation”. Its brands include Kevlar and formerly Teflon, now part of Chemours Co, which it had spun off.

The 118-year-old Dow makes plastics, chemicals, hydrocarbons and agrichemicals. Dow Automotive is a leader in thermoset plastics, which can not be remolded and are used in exteriors and “in-car” products, while DuPont’s automotive unit primarily focuses on thermoplastics, which soften when heated, and various “under the hood” products. It said on Friday it would buy the remaining stake in the joint venture from Corning Inc. Those will be split into agriculture products, material science, and specialty chemical products.

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

Monsanto said Friday it would not act rashly and likes its position in the marketplace. Dow was formed in 1897 and DuPont was formed in 1802. “This transaction is a major accelerator in Dow’s ongoing transformation, and through this we are creating significant value and three powerful new companies”.

“There is a big execution risk”, Yefremov said. “This deal had to be had to create value for shareholders”.

“The Dow Corning deal brings the Dow Corning silicons business into Dow”.

10, 2015 photo shows a Dow Chemical plant in La Porte, Texas.

DuPont shares fell 5.5% at 4 p.m. trading in NY, as the company also issued downbeat comments on its expected 2016 sales growth. The agriculture sector will likely receive the most scrutiny. “I’ll be listening to Iowa farmers and consumers about any concerns they may have with this proposal, and the Judiciary Committee will be exercising its appropriate oversight function”.

Klein and Company, Lazard, and Morgan Stanley & Co.

“I think it’s the best thing the coal company all leave the area you combine like that and employ local people that won’t have to leave the state”, Miller said.

Although the two companies share some markets, Dow and DuPont executives say they don’t expect regulators will force them to make many divestitures before approving the merger. One of those would offer everything for agriculture that DuPont Pioneer now has, plus Dow’s fertilizer business.

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

The transaction is expected to yield more than $US1 billion in additional annual EBITDA at full run-rate synergies, Dow Chemical said. In 2006 DuPont’s agricultural unit was its fourth-biggest business by operating income. The subsequent separation of DowDuPont, which the companies intend to pursue, would be expected to occur 18-24 months following the closing of the merger. It will compete with the likes of corporate titans BASF, Honeywell, and 3M.