DuPont, Dow Will Merge

Terms of the agreement state that Dow shareholders will get 1 share of the new enterprise for each Dow share they own, while DuPont shareholders will get 1.28 shares.

12/11/2015Dow Chemical Co. and DuPont Co. plan to announce a merger Friday, according to people familiar with the matter, a deal that would be the largest ever in the chemicals industry.

The massive deal also will need the approval of federal regulators. Once that deal closes in the second half of 2016, DowDuPont will start spinning off three businesses into separate publicly traded companies within 18 to 24 months.

After the merger, the resulting behemoth would be split into what Dow Chairman and CEO Andrew Liveris calls “three powerful new companies”, with a combined revenue of around $83 billion. Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 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.

Dow and DuPont have been struggling to cope with falling demand for farm chemicals due to falling crop prices and a strong dollar, even as their plastics businesses have thrived thanks to low natural gas prices.

With both companies now competing on an equal level in most areas, splitting the load and creating cost synergies of around £3bn would be feasible, say industry specialists.

The companies aim to achieve the split into three within two years of the completion of the merger.

In a separate announcement, Dow Chemical said it would buy the remaining stake in its 50-50 joint venture with Corning Inc (GLW.N), the supplier of Gorilla Glass for iPhones. The combined adjusted revenue of that business was about $13 billion in 2014.

The specialty products company would combine DuPont’s nutrition and health, industrial biosciences, safety and protection, and electronics and communications segments with Dow’s electronic materials business.

The new company’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors.