Dow Chemical and DuPont in merger talks

And this May, DuPont – formally EI du Pont de Nemours & Co. – successfully fended off a board challenge by Nelson Peltz, dealing the billionaire financier his first loss since he opened his current firm, Trian Fund Management, a decade ago.

Dow Chemical and DuPont are in talks for a mega-merger that would yield the world’s top chemical giant, with products from pesticides to genetically modified organisms, banking sources told AFP Tuesday.

A deal, which would face regulatory approval in several countries, would allow the two USA companies to rejig their assets based on their diverging fortunes. The firms would be for agriculture, material services and specialty products.

The merger would likely be followed by a split of the combined company into three independent entities, Bernstein said, namely a “New Pioneer” – an Agriculture company which would be number two in seeds and number three in crop protection: “a “New DuPont” – which would be the largest specialty chemicals company in North America, and a ‘New Dow”: a commodity company similar to LyondellBasell, but with polyurethanes instead of propylene oxide and refining. “Dow does not comment on rumour or speculation, as a matter of company policy”, it said.

Chemical equity analysts at Bernstein on Wednesday said a merger between US-based chemical producers Dow Chemical and DuPont had the potential to unlock high growth long term for both companies.

The chemical giants, which each have a market capitalization of about $60 billion, could announce a merger in coming days, people familiar with the matter said.

As of Tuesday’s trading close, Dow had a market valuation of $58.97 billion, while DuPont was valued at $58.37 billion.

DuPont CEO Edward Breen, who took over only in October, is expected to hold the same position post-merger. (NYSE:DOW) reported nine-month (ended September 30, 2015) net sales of $37.31 billion, down 14.78% year-over-year (YoY). “That doesn’t mean the deal will necessarily be prohibited”, said Angela Zhang, an antitrust expert at King’s College in London. However, if the companies “can offer remedies that satisfy the Chinese regulators”, they could obtain clearance subject to conditions, Zhang said. MON-SYNN catalyzed industry wide discussion and DuPont made it clear they want a suite of options to choose from and see greater value moving sooner rather than later. Last year, the company added two directors nominated by Daniel Loeb’s Third Point LLC after Mr. Loeb sought a breakup of the company and threatened a proxy fight.

Dow has a large building and insulation supply business in the United Kingdom while DuPont owns major parts of ICI’s chemical operations.