Dow, DuPont to combine in $130bn merger of equals

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LONDON (ICIS)–US-based chemicals giants DuPont and Dow Chemical on Friday announced that they will combine their businesses in an all-stock merger of equals.

The combined market capitalisation will be approximately $130bn. The merger transaction is expected to close in the second half of 2016.

The new company, named DowDuPont, will have three divisions, Agriculture, Material Science and Specialty Products, with all three entities planned to be publicly traded on the stock exchange.

“The companies [publicly listed] will include a leading global pure-play Agriculture company; a leading global pure-play Material Science company; and a leading technology and innovation-driven Specialty Products company,” said the two companies in a jointly issued statement.

“The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs,” they added.

The companies said the merger would create $3.0bn in synergies, with a further $1.0bn in growth synergies also expected.

“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,” said Andrew Liveris, Dow’s CEO.

“Over the last decade our entire industry has experienced tectonic shifts as an evolving world presented complex challenges and opportunities – requiring each company to exercise foresight, agility and focus on execution.”

Edward Breen, chairman and CEO of DuPont, said: “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.

“Each of these businesses will be able to allocate capital more effectively, apply its powerful innovation more productively, and extend its value-added products and solutions to more customers worldwide.”

Liveris will be named executive chairman and Breen named CEO of combined company.

Breen added that the merger will allow the three resulting business to allocate capital expenditure more effectively while applying their different innovative techniques would enhance its customer base.

“For DuPont, this is a definitive leap forward on our path to higher growth and higher value. This merger of equals will create significant near-term value through substantial cost synergies and additional upside from growth synergies,” said Breen.

“Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each business will be a leader in attractive segments where global challenges are driving demand for these businesses’ distinctive offerings.”

Under the terms of the agreement signed by the two firms, Dow Chemical’s shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share.

Dow and DuPont shareholders will each own approximately 50% of the combined company, on a fully diluted basis, excluding preferred shares.

The three different entities would entitle what the two chemical majors called an Agriculture Company, a Material Science Company and a Specialty Products Company.

Dow and DuPont plan to spin off and list the three entities within 18-24 months after the merger has been closed. The deal is subject to customary closing conditions, including regulatory approvals and approvals by Dow and DuPont shareholders. 

The Agricultural Company would combine DuPont’s and Dow’s seed and crop protection businesses, with combined pro forma 2014 sales at $19bn.

The Material Science Company would consist of DuPont’s Performance Materials segment as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions, and Consumer Solutions (excluding the Dow Electronic Materials business) divisions. Combined pro forma 2014 revenue for Material Science was approximately $51bn, the two companies said.

The Specialty Products Company would include DuPont’s Nutrition & Health, Industrial Biosciences, Safety & Protection and Electronics & Communications as well as the Dow Electronic Materials business. Combined pro forma 2014 sales were approximately $13bn.

DowDuPont’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors.

Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware.

The two companies will hold a conference call at 13.00 GMT (8.00 US eastern time) to explain more details of the merger to investors and media.

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