Dow, DuPont to join forces in merger
DEAL COMES AFTER 2 YEARS OF PRESSURE FROM ACTIVIST INVESTORS
Dow Chemical Co and DuPont Co, two historic giants of US industry, will merge in a deal that’s the first step in a plan to create three new highly-focused businesses.
The merger, the largest ever in the chemicals industry, will combine products from both Dow and DuPont in the areas of agriculture, commodities chemicals and speciality chemicals to create the new businesses. It comes after two years of pressure from activist investors who argued that shareholders of both companies would realise greater value if they were broken up.
Dow and DuPont will combine in an all-stock deal to create a new company, DowDuPont, with a market capitalisation of about $130 billion (Dh477 billion), they said yesterday in a joint statement. Dow Chief Executive Officer Andrew Liveris, 61, will become executive chairman. DuPont CEO Ed Breen, 59, will be CEO of the new company.
Investors will get one DowDuPont share for each Dow share, and 1.282 DowDuPont shares for each one of DuPont.
Expect spin-off
The eventual break-up of DowDuPont into three independent, publicly traded companies through tax-free spinoffs is expected over 18 to 24 months following the completion of the merger.
“This transaction is a gamechanger 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 the statement.
Despite its size and complexity, the deal could overcome antitrust concerns with modest divestitures, according to analysts who track the companies.
The product overlap isn’t extensive and the focus will probably be on seeds and crop chemicals, said Jason Miner, an analyst at Bloomberg Intelligence.
Even in those markets, Dow and DuPont compete against large rivals like Syngenta AG, Monsanto Co. and Bayer AG, Miner said. It’s been a bumpy 2015 for DuPont, whose legacy reaches back to 1802 in Wilmington, Delaware, where the company is still based.
In May, DuPont CEO Ellen Kullman won a proxy battle waged by Trian Fund Management, the activist investor cofounded by Nelson Peltz, which said a break-up of the company would save billions of dollars in costs.
Breen, perhaps best known for his role in the break-up of Tyco International Plc, replaced Kullman as CEO in November, setting up the basis for the merger.