Dow Chemical, DuPont reach deal on merger

December 13 23:50 2015

Two chemical and agricultural giants, Dow Chemical and DuPont, have agreed to combine in a $68.6 billion deal that would make it the 18th largest merger ever. The combined company would be called DowDuPont and would have a combined market value of about $130 billion. After completing the deal, DowDuPont would split into three companies — one focused on agriculture, one on material science and one on specialty products. They estimated it would take up to two years to complete the tax-free split. Until then, shareholders of each company will hold 50% of the combined company.DuPont-Research-Center

Dow Chemical CEO Andrew Liveris will become executive chairman of the new entity, while DuPont CEO Edward Breen will become chair and CEO. “When I look and DuPont and Dow, I see businesses that fit together like hand in glove,” Breen said in a conference call. “The strategic nature of what we could pull off is incredible. To me it checks all the boxes of a great deal and a way to create value for our shareholders.” The companies have identified $3 billion in annual cost savings, which they said would translate into $30 billion in market value. With rising commodity prices, the Dow and DuPont are facing pressure to bolster their profit margins while preserving market share.

Before the merger, DuPont said it will shed $700 million in costs. About 10% of its global workforce will be “impacted,” according to a statement. The company had 63,000 employees at the end of 2014. “We are undertaking a selection process on the reductions and that will take some time,” DuPont spokesman Dan Turner said in an email. “However, we will begin implementing the changes immediately, and expect most of these actions to be complete by the end of the first quarter in 2016.” For its part, Dow is slashing $300 million in costs before the closure of the deal as part of what it called a three-year, $1 billion “productivity plan.”

The companies said they would maintain dual headquarters in Midland, Mich., and Wilmington, Del., but said they plan to “optimize” their physical footprint, which could mean plant closures. The deal comes amid a record year for mergers and acquisitions announced by U.S. companies. M&A activity in 2015 hit a record $4.6 trillion as of Monday, according to Dealogic.

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