How DuPont and Dow Chemical merger could be a ‘game-changer’

The new group will be split into three separate entities: agriculture, specialty chemicals and materials, they said.

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 merger calls for Dow Chemical stockholders to receive one share of the company for each share they now own, while DuPont holders would exchange each of their shares for 1.282 shares of DowDuPont. Meanwhile the two companies have undertaken significant cost-cutting efforts in recent years amid increased shareholder pressure to boost profits and improve margins. Combined pro forma 2014 revenue for Agriculture is approximately $19 billion.

In its patent application for Lycra, DuPont highlighted some of the features that would make Lycra famous: The “outstanding properties” suggesting “many applications in the film and fiber fields”, including a “high elasticity”. Because the firms are of similar value, the transaction will be a merger of equals, with shareholders of each company getting shares of the new DowDuPont.

Antitrust regulators may look favorably on the deal given the three-way split, but, ultimately, must determine how the merger will affect competition among various markets involved. On a pro-forma basis, their combined revenue would be $83 billion, according to a presentation Friday. The eventual breakup of DowDuPont into three independent, publicly traded companies through tax-free spin-offs is expected over 18 to 24 months following the completion of the merger in the second half of 2016. The new company will have a dual headquarters in Midland, Michigan where Dow is presently headquartered and Wilmington, Delaware the home base of DuPont.

DuPont’s ag business employs more than 12,000 workers, while Dow’s employs about 9,000.

While DuPont argued that its stock had outperformed traditional measures like the Standard & Poor’s 500-stock index, Trian argued that the company had not cut enough costs and repeatedly missed financial performance targets. The company also announced in May that it was cutting between 1500 and 1750 jobs or about 3 percent of its global workforce as it prepared to close a 5 billion deal to sell much of its chlorine operations to Olin Corp.

A proposed merger between two giants of American business, DuPont and Dow, could ultimately result in an agricultural company more focused on farmers than either is today.

DuPont is 213 years old, and makes different products that are used in pharmaceuticals, petro chemicals, food and construction. Forecasters presume the corn seed segment to be divested to satisfy antitrust regulators, despite DuPont CEO Edward Breen saying that no major divestitures are expected. DuPont’s Pioneer unit is strong in the genetics of crop plants’ tissues and seeds, known as germplasms, while Dow Agro is strong in the genetically engineered traits that can be implanted in seeds. DuPont shares were down 4.4 percent at $71.25 in premarket trading, while Dow’s were down 1.8 percent at $53.92.

The new board would have 16 members, with each company contributing eight directors.

DuPont’s automotive unit ranks No. 64 on Automotive News’ list of the top 100 global suppliers with an estimated $3 billion in worldwide sales to automakers in 2014.