Chemical Giants Dow Chemical and DuPont Announce $130 Billion Merger

Numerous deals reflect companies’ desire to step up growth by giving them added market share, new products or expanded geographic reach.

The planned split would create businesses focused on farming, materials and specialty products and it is to be called DowDuPont.

“This transaction is a game-changer for our industry”, Dow Chemical Chairman Andrew Liveris said in a statement. While both companies are all about why this deal is a masterstroke, critics are arguing that the companies would be better off staying independent and have accused them of trying to make a quick buck at the expense of long-term growth.

The combination will help the firms save about £1.9billion in the first two years, with the possibility of saving another £650million.

Breen took over as DuPont CEO after the resignation in October of Ellen Kullman, who just a few months earlier fended off a proxy challenge by Trian Fund Management, a hedge fund led by activist investor Nelson Peltz. The merger puts further pressure on rivals such as Germany’s BASF SE and Bayer AG to consolidate as falling crop prices curb sales.

Corning said it will swap its stake in Dow Corning for $4.8 billion (£3.2 billion) in cash and a stake in chip company Hemlock Semiconductor Group, a venture of Dow Corning.

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.

“DuPont and Dow are two titans of American industry and the proposed merger demands serious scrutiny”, said Senate Judiciary Committee Chairman Chuck Grassley, a Republican from the Farm Belt state of Iowa.

Under the merger’s exchange ratio, DuPont shareholders would receive $70.38 a share, based on Thursday’s closing prices, or a total of $61.7 billion. DuPont expects to record a pretax charge of about $780 million, with approximately $650 million of employee separation costs.

It comes as both Dow and DuPont Co. have experienced recent declines in agricultural performance and have been pressured by activist shareholders to control spending and shift from commodities to faster-growing parts of their businesses.

Dow shareholders would own 52 percent of the new company after preferred shares are converted, the companies said. Countless details need to be addressed, ranging from the name of the new company to connecting key computer systems in area such as accounting.

Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion.

The combined revenue for the materials business was about 51 billion in 2014 on an adjusted basis.

The companies said the proposed merger of equals, approved unanimously by their respective directors, will result in cost synergies of about $3bn that are projected to create approximately $30bn of market value. The technology-driven specialty products company will look after DuPont’s Nutrition & Health, Safety & Protection, Industrial Biosciences, Electronics & Communications segment, along with Dow’s Electronic Materials business. The company will have dual headquarters in Midland, Mich., and Wilmington, Del., where they are now based.

It was around then that Whiting first heard rumors that Dow might be looking to sell or merge its agricultural business, he says.