Dow, DuPont to merge in deal valuing chemical giants at $130 bln

Shareholders of Dow Chemical will get 1 share in the new DowDuPont for each Dow share, while DuPont shareholders will get 1.282 shares for each DuPont share.

“We will have the most complete portfolio of any ag company”, split roughly 50:50 between seed and agrichemical operations, compared with a Monsanto operation skewed towards seeds, and Syngenta to sprays. Each also has faced pressure from activist investors. Their combined revenue in 2014 was $19 billion. DuPont is one of the 30 stocks in the Dow Jones industrial average, and its decline helped drive the blue-chip average lower by 286 points Friday morning, to 17,288.20. The deal is expected to close during the first half of 2016, Corning said. It plans to slash about 10 percent of its work force and take a pretax charge of $780 million. Like the Dow-DuPont deal, that one involves a possible corporate split later on to form separate companies, one focused on innovative products and the other on generic drugs.

The agriculture business – which will combine a DuPont unit best known for its Pioneer seeds with a Dow Chemical division more weighted towards agrichemicals – will rank as the world leader in the sector, with sales of $19bn. Breen will lead the Agriculture and Specialty Products committees. The company, dubbed DowDuPont, will have dual headquarters in Midland, Mich., and Wilmington, Del.

Similarly, Dow CEO Andrew Liveris told analysts in October that there were “potential synergies in a newly consolidating agricultural market” regarding Dow AgroSciences. Under the terms of the agreement, Dow will become the 100 percent owner of Dow Corning, now a 50/50 joint venture between the two companies.

Trian, which owns a major stake in DuPont and unsuccessfully pressed for board seats in a proxy fight earlier this year, said it “fully supports this transformative transaction and believes that the combination of DuPont and Dow is a great outcome for all shareholders”.

The companies expect to find a total of about $3 billion in cost synergies and gain $1 billion in growth synergies through the deal.

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.

“The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation”, SunTrust’s Sheehan said.

The new company’s board will have 16 directors, consisting of eight current DuPont directors and eight current Dow directors, and two independent co-lead directors.

“The state is committed to supporting those affected by DuPont’s cost cutting in Delaware”, said Delaware Gov. Jack Markell.

The three companies will focus on agriculture, material science and specialty products, the companies said in a statement. Their complementary offerings will create a new global leader in electronics products, and each business will benefit from more targets investment in their productive technology development and innovation capabilities. The combined adjusted revenue was about $13 billion in 2014.