National Post (Latest Edition)

CHEMICAL ATTRACTION

Dow and DuPont seal US $130B merger deal, before breaking into three units.

- By Jack Kaskey and Simon Casey

Dow Chemical Co. and Du Pont., Co two historic giants of U. S. industry, will join in an all- stock merger of equals that’s the first step in a plan t-o create three new highly-fo cused businesses.

The deal, the largest ever in t-he chemical industry, will cre ate a US$130 billion company that combines products from both Dow and DuPont in the a-reas of agricultur­e, commod ities chemicals and specialty chemicals to create the new businesses. The agreement, percolatin­g since at least February, comes after two years o- f pressure from activist in v-estors who argued that share holders of both companies would realize greater value if they were broken up.

The new company, DowDuPont, will be owned 50- 50 by the current shareholde­rs of b-oth companies, they said Fri day in a joint statement. Dow chief executive 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. The eventual breakup of DowDuP-ont into three independ ent, publicly traded companies through tax- free spin- offs 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.

De- spite its size and com p- lexity, the deal could over come antitrust concerns with modest divestitur­es, according t-o analysts who track the com panies.

The product overlap isn’t extensive and the focus will probably be on seeds and crop chemicals, said Jason Miner, an analyst at Bl-oomberg Intel ligence.

Dow shares were l i ttle changed at US$ 54.80 at 8: 01 a- . m. before the start of regu lar trading New York, but closed down 2.79 per cent, at US$53.83, on the day. DuPont fell 5.5 per cent, closing at US$70.44.

Dow’s financial advisers on the deal are Klein & Co- ., Laz ard Ltd. and Morgan Stanley while its legal adviser is Weil, Gotshal & Manges LLP. DuPont’s financial advisers are Evercore Partners Inc. and Goldman Sachs Group Inc. Its legal adviser is Skadden, Arps, Slate, Meagher & Flom LLP.

It’s been a bumpy 2015 for DuPont, whose legacy reaches back to 1802 when E. I. du Pont built a series of gunpowder mills along the banks of the Brandywine Ri-ver near Wilm ington, 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 co- founded by Nelson Peltz, which said a breakup of the company would save billions of dollars in costs.

Breen, perhaps best known for his role in the breakup of T-yco Internatio­nal Plc., re placed Kullman as CEO in November, setting up the basis for the merger.

Dow harks back to 1897, after Herbert Henry Do-w dis covered a new way to extract the element bromine — then a useful ingredient in medicine and photograph­ic materials — from brine located in wells around Midland, Mich i-ts cur rent base.

The three new businesses would focus on agricultur­al p roducts i ncluding herbicides and geneticall­y modified seeds, commodity chemicals i- ncluding plastics, and spe cialty chemicals such as those used in solar panels.

Du- Pont’s agricultur­e busi ness accounted for US$ 9.2 billion of revenue in the first nine months of 2015, or 41 per cent of total sales, according to data compiled by Bloomberg. Dow’s unit had US$4.8 billion of sales, for 13 per cent of the total.

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