Dow Chemical and DuPont to Merge
After a period of negotiation that began in February, Dow Chemical and DuPont have officially announced the $130 billion all stock, 50/50 mega-merger of the two chemical and agricultural giants to form DowDuPont, according to Bloomberg. The deal is expected to close in the second half of next year if regulatory approval is obtained. Once combined, the two companies which generated $92 billion in sales would rank as the second biggest chemical company in the world based on revenue, behind Germany’s BASF reports the New York Times.
Within the first two years after merging, DowDuPont plans to split into three publicly traded, independent businesses through a process of tax-free spin offs. Ed Breen, the current CEO of DuPont, will lead the advisory committees responsible for the spin-off of what will become a “pure-play agriculture” unit and the specialty products unit, while Andrew Liveris, current CEO of Dow Chemical will lead the advisory committee for the spin-off of the material sciences unit.
The agricultural unit will bring together both DuPont’s and Dow’s seed units and crop protection units with expected revenue of $19 billion. The material science units will encompass DuPont’s Performance Materials unit and Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer Solutions units with expected revenues of $51 billion. And the Specialty Products business will include DuPont’s Nutrition and Health, Industrial Biosciences, Safety and Protection and Electronics & Communications units, along with Dow’s Electronic Materials unit, with expected revenue of $13 billion reports NPR.
“This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders,” Liveris said in a statement, reports Bloomberg.
It is widely expected that the deal will draw a substantial level of scrutiny from U.S. anti-trust authorities, particularly for the agricultural business aspect of the deal. However, analysts that track the two companies believe that the deal could obtain approval if the parties agree to certain divestitures reports Bloomberg. If, however, the deal fails to secure approval from the U.S. Department of Justice, the two companies have not released any information indicating if there will be any imposed termination fees.
The merger is expected to lead to $3 billion in cost savings and additional earnings of approximately $1 billion, with DuPont announcing in its own statement that its own efficiencies which include cutting 10% of its workforce in 2016, will save about $700 million, with a pre-tax impairment charge of $780 million.
The new company, which is being called a merger of equals, will be owned 50/50 by the current shareholders of both DuPont and Dow Chemical. Investors will receive one DowDuPont share for each Dow share, and 1.282 DowDuPont shares for each DuPont share. Mr. Liveris will serve as the executive chairman of the newly merged DowDuPont, while Mr. Breen will serve as the CEO, according to Fortune.