USA chemcial giants to merge in $195b deal

The deal will, in agriculture, create the opportunity for $1.3bn of deal benefits, such as cutting out duplicated costs, out of a total of some $3bn from the Dow-DuPont merger.

Despite the eventual breakup, the deal would undergo rigorous antitrust scrutiny for all three companies, particularly the agricultural chemicals company.

Executives from both companies said the agrichemicals businesses have little overlap and any asset sales would likely be minor.

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.

“I’m not naive about what’s going on in the ag space right now”, DuPont CEO Edward Breen said in an October analyst call. If the Dow/Dow Corning deal closes first, it will join Dow, and then become part of DowDuPont. Dow Chemical shares were down 3 percent at $53.27.

Activist investor Nelson Peltz has been pressing DuPont to separate its agriculture, nutrition and biosciences units from its building and safety materials divisions.

The specialty products company, with a combined revenue of $13 billion in 2014, would sell materials to the electronics and communications industries, among others.

The Board of Directors of DuPont and Dow Chemical Company on 11 December 2015 unanimously approved a definitive agreement to merge the two companies in an all-stock deal.

A potential merger with DuPont will bring transformative changes for both companies. The merger would form the world’s second largest chemical company. Earlier this year, Missouri-based Monsanto, the world’s largest seed company, abandoned a $46.5 billion hostile bid for Swiss pesticide giant Syngenta. Last month, Syngenta rejected a $42 billion offer from state-owned China National Chemical Corp.

Dow boss Andrew N. Liveris will be the combined firms’ executive chairman. The company will have dual headquarters in Midland, Michigan, and Wilmington, Delaware, where they are now based. Breen and Liveris will serve on the board along with two co-lead directors. He said he doesn’t expect issues because most of the businesses are complementary and not competitive.

But Breen said that while consolidation in the agricultural industry is a “natural step”, any ag-related divestitures are likely to be minimal.

The business is expected to supply more than 40% of the corn seed market, and slightly less of the soybean seed market. The companies said the deal should cut annual expenses by $3 billion. The DowDuPont announcement may put pressure on other companies to combine. It plans to slash about 10 percent of its work force and take a pretax charge of $780 million. He added, “When I do cost cuts over the years, I always am very careful not to over-affect the person that is selling the product to the customer and the people inventing and making the product”.

Dow also said on Friday that it planned to restructure its ownership with Dow Corning by becoming a full owner, up from a 50-50 joint venture.

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. Combined pro forma 2014 revenue for agriculture was about $19 billion.

The biggest of the three new companies by revenue would be material sciences, catering to the packaging, transportation and infrastructure industries. The proposed split would create businesses focused on agriculture materials and specialty products.

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

Dow was founded in 1897 by Canadian-born chemist Herbert Dow to produce bleach using new technology he had developed to extract chlorine from brine.