Saudi- Dow Chemical and DuPont merge to create 130bn chemical giant

The board of the new company would have 16 directors, evenly divided between current Dow and DuPont directors.

Dow Corning’s silicones business will join this company. The merger is the largest ever in the chemicals industry. But Nomura analyst Aleksey Yefremov thinks that rivals could be in benefit when Dow and DuPont integrate because both the companies have different cultures, with DuPont more in research and growth-driven and Dow focuses on tight cost controls and modest innovation. Major competitors would be Germany’s BASF, Honeywell and 3M. Dow Chemical shares were down 3 percent at $53.27. Combined pro forma 2014 revenue for Materials Science is about $51 billion. It abandoned a $45 billion offer for the Swiss company in August. DuPont CEO Ed Breen will be CEO of the new company and Dow Chemical CEO Andrew Liveris will be executive chairman.

In remarks to investors, the men said they had used advice from corporate raiders Daniel Loeb of the Third Point hedge fund group, which owns 2 percent of Dow, and Nelson Peltz of the Trian hedge fund group, which owns 3 percent of DuPont, in designing the split-up, which they hope to conclude by late 2017.

Another activist investor, Dan Loeb, has been pushing Dow to split its agri business and other speciality chemical units from its petrochemical divisions.

“This is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the combination of two highly complementary global leaders and the creation of three strong, focused, industry-leading businesses”, Breen said in a statement. The company will have dual headquarters in Midland, Michigan, and Wilmington, Delaware, where they are now based.

Michael Ritzenthaler, an analyst for Piper Jaffray, said he expects Monsanto to renew its bid for Syngenta.

The split of three-ways will not occur for the next 18 to 24 months following the close of the deal, which is expected during the last six months of 2016. It plans to slash about 10 percent of its work force and take a pretax charge of $780 million.

“The bigger and more transformative the deal, the more likely it will in fact affect competition in some fashion, even with a remedy”, Grunes said.

The New York investment firm said it was approached by the companies to “assist in negotiations”, including on structure and governance of the combined entity and the planned spinoffs.

The companies anticipate $300 million in cost synergies here. Under the merger’s exchange ratio, DuPont shareholders would receive $70.38 a share, based on Thursday’s closing prices, or a total of $61.7 billion.

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 state is committed to supporting those affected by DuPont’s cost cutting in DE”.

The material science company would combine DuPont’s performance materials segment with Dow’s performance plastics, performance materials and chemicals, infrastructure solutions, and consumer solutions units, excluding its electronic materials business. An additional upside of approximately 1 billion dollars is expected from growth synergies.

Seeds and chemical maker Dow Chemical Co said it would buy the remaining stake in its joint-venture with Gorilla glass maker Corning Inc.

The agrichemical company is expected to generate $19 billion through the sale of seeds and chemical insecticides to the agricultural industry.

The combined market capitalization will be approximately $130 billion.

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.