DuPont, Dow Chemical Agree to Merge–6th Update

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.

However, the aim is, 18-24 months after the merger is completed, to separate out the combined Dow-DuPont businesses into three spin-offs – in agriculture, materials science, and speciality products.

The merger one of the biggest of the year will allow Dow and DuPont to rejig assets based on the diverging fortunes of their businesses that make agriculture chemicals and plastics.

‘Over the last decade our entire industry has experienced tectonic shifts as an evolving world presented complex challenges and opportunities, ‘ said Dow Chairman and CEO Andrew Liveris in a statement. As chief executive of Tyco, he oversaw its split into three separate companies, including the home alarm unit ADT, a valve-and-pipe unit, and a commercial fire and security business.

DuPont expects 2016 sales growth to be “challenging”, due to economic weakness in agriculture and emerging markets. DuPont on Friday said that even before the merger, it plans to cut about 10% of its global workforce.

The deal “was always in front of us to get done, in the right way”, Liveris told the Wall Street Journal.

The deal will likely face scrutiny by antitrust regulators.

Excluding preferred shares, existing shareholders of Dow and DuPont will each own about 50 percent of the combined company.

The people said that once the deal pushes through, a three-way breakup of the combined company would follow, which is a recently common approach to mergers and acquisitions. Dow employs 53,000, while DuPont had 63,000 employees as of the end of 2014.

The companies have two of the best-known names in USA corporate history.

Liveris will be named executive chairman of the combined company while DuPont Chairman and CEO Edward Breen will be CEO.

The new company would have dual headquarters in Wilmington, Del., and Midland, Mich.

Executives boast that the two companies have complementary offerings in packaging, especially in multilayered structures, where, for example, DuPont’s Surlyn resin might be used with Dow’s linear low-density polyethylene.

DuPont has previously licensed some of Dow Agro’s seed traits to put into its seeds and sell under the Pioneer brand.

Dow said it is taking full ownership of Dow Corning, now a 50-50 joint venture between Dow and Corning.

The companies said the merger would mean “run-rate cost synergies of approximately $3 billion, which are projected to create approximately $30 billion of market value”. DuPont expects to record a pretax charge of about $780 million, with approximately $650 million of employee separation costs.

Additional upside of approximately 1 billion dollars is expected from growth synergies.

DuPont shareholders will receive 1.282 shares of DowDuPont for each DuPont share and Dow shareholders will get 1.00 share of DowDuPont for each Dow share. Analysts have said a Dow-DuPont tie-up might push Monsanto Co to take another shot at Syngenta after the U.S. company abandoned a 45 billion offer for the Swiss company in August.

The planned agriculture company would combine the seed and crop protection businesses of DuPont and Dow.

The material science business, the largest of the three with shared revenues of $51 billion for 2014, would be a merger of DuPont’s performance materials segment with multiple Dow divisions, which include performance plastics, performance materials and chemicals, infrastructure solutions, and consumer solutions. On a pro-forma basis, their combined revenue would be $83 billion, according to a presentation Friday.