DuPont, Dow Chemical seek merger, then 3-way split

U.S. chemical giants DuPont and Dow Chemical Co have agreed to merge in an all-stock deal valuing the combined company at $US130 billion ($A178 billion), with plans to eventually split into three.

But competition authorities are expected to pay close attention to the transaction due to the extensive overlaps between the pair’s agricultural operations.

The three companies will focus on agriculture, material science and specialty products, the companies said in a statement. DuPont Chief Executive Ed Breen said in an interview that they plan to divest only minor pieces of their businesses-“nothing that would move the needle”, he said.

The companies expect to find a total of about $3 billion in cost synergies and gain $1 billion in growth synergies through the deal. Specialty products, encompassing electronics, nutrition, industrial biosciences and safety, would have revenue of about $13 billion.

Under the deal’s terms, shareholders of Dow Chemical will get one share in the new company called DowDuPont for each Dow share, while DuPont shareholders will get 1.282 shares for each DuPont share.

Activist investor Nelson Peltz of Trian Partners, who has pressed DuPont to separate its businesses, said he “fully supports” the transaction and sees the combination as “a great outcome for all shareholders”. On a pro-forma basis, their combined revenue would be $83 billion, according to a presentation Friday.

The companies said they believe they can extract $3 billion in annual costs within 24 months, and expect about $1 billion in “growth synergies”.

The agriculture company would unite DuPont’s and Dow’s seed and crop protection businesses.

The transaction is billed as a merger of equals, although by revenues, Dow – at $58 billion in 2014 – is much bigger than DuPont, at $35 billion past year.

Creation of three companies that will spun off in the future is proposed.

“There is a big execution risk”, Yefremov said. “This deal had to be had to create value for shareholders”.

“We do well if the common at Dow does well”, Buffett said in 2012.

SunEdison Inc said it would sell 333 megawatts (MW) of wind-power assets for $209 million to a partnership of the USA solar company and investors advised by JP Morgan Asset Management Ltd.

“Any merger that consolidates this market into fewer hands will give farmers fewer choices and put them at even more economic disadvantage”.

In a separate announcement today, which will further impact the Materials Science business, Dow announced that it had signed definitive agreements to restructure the ownership of Dow Corning.

The seed market is already dominated by the massive multinational Monsanto, says Diana Moss, president of the American Antitrust Institute. “You’re nearly creating duopoly in the market, and that’s a problem”, she said.

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. Evercore and Goldman, Sachs are advising DuPont.

Generally, it is agriculture and performance materials and chemicals where regulators will have to spend the most time looking at antitrust claims.