Dow-DuPont merger will create world’s top seeds, sprays group

The deal, which was formally announced on Friday, will face intense scrutiny from regulators especially over the combining of the two agricultural businesses, which sell chemicals for the protection of seeds and crops, including pesticides and insecticides. Dow and DuPont shareholders will own about 50 percent, respectively, of the combined company.

Dow Chemical CEO Andrew Liveris will be executive chairman of DowDuPont while Edward Breen, CEO of DuPont, will become its chairman and chief executive officer.

Under the terms of the merger, Dow shareholders will receive a fixed exchange ratio of one share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share.

DuPont and Dow shares were down on Friday after earlier this week soaring on speculation of the merger. The combined pro forma 2014 revenue for agriculture is approximately $19 billion.

DuPont’s businesses would make up the bulk of this new company, with $11 billion in sales from electronics and communications, safety and protection, nutrition and health, and industrial biosciences.

Breen will lead the other two companies. “To the extent that they are happy with DuPont now, the employees, the business decisions made at DuPont Pioneer, could only probably improve to better focus on farmers as customers”, King said.

Dow said it would take full ownership of Dow Corning Corp., which it jointly owns with Corning Inc.

The material science company would consist of DuPont’s Performance Materials segment as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer solutions (excluding the Dow Electronic Materials business) operating segments. Dow Chemical has endured activist pressure from Third Point.

The US chemicals conglomerates on Friday revealed details of a merger, rumoured earlier this week, which will see the group initially combine into DowDuPont- a group with revenues of some $84bn a year, at 2014 values, and earnings before interest, tax, depreciation and amortisation of $15bn. Dow said closing is expected by mid-2016 and that Dow Corning will continue to operate as a separate, active business.

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. It abandoned a $45 billion offer for the Swiss company in August.

Meanwhile, DuPont completed a spinoff this year of its struggling performance chemicals unit into a separate company called Chemours. “You’re nearly creating duopoly in the market, and that’s a problem”, Diana Moss, president of the American Antitrust Institute, told Reuters. A potential merger with DuPont will bring transformative changes for both companies.

Upon completion of the transaction, Liveris will become executive chairman of the DowDuPont board of directors.

Whether the plans will merge and how it will affect the assets under management of DuPont Capital Management, DuPont’s money management unit, could not be immediately learned.