MOSCOW (MRC) -- Dow Chemical Co. and DuPont 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 to create three new highly-focused businesses., said Bloomberg.
The deal, the largest ever in the chemicals industry, will create a USD130 billion company that combines products from both Dow and DuPont in the areas of agriculture, commodities chemicals and specialty chemicals to create the new businesses. The agreement, percolating since at least February, comes after two years of pressure from activist investors who argued that shareholders 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 both companies, they said Friday 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.
The companies said the split would "occur as soon as feasible" and would likely happen 18-24 months after the deal closes, which is expected in the second half of 2016.
The combination will help the companies save about USD3 billion in costs in the first two years, with the possibility of saving another USD1 billion, Dow and DuPont said.
The biggest of the three new companies by revenue would be a material science company, which would cater to the packaging, transportation and infrastructure industries. The combined revenue for the materials business was about USD51 billion in 2014, on an adjusted basis.
The companies said a new specialty products company would focus on electronics. The combined adjusted revenue of that business was about USD13 billion in 2014. The third business, selling seed and crop protection chemicals, generated adjusted revenue of about USD19 billion.
DowDuPont's board is expected to have 16 members, with each company contributing eight directors, the companies said. In a separate announcement, Dow Chemical said it would buy the remaining stake in its 50-50 joint venture with Corning, the supplier of Gorilla Glass for iPhones.
The transaction is expected to yield more than USD1 billion in additional annual EBITDA at full run-rate synergies, Dow Chemical said.
As MRC informed earlier, in March, Dow said it would spin off a significant portion of its chlorine business to chemicals maker Olin Corp. And last year it said it would separate more of its commodity-based chemicals business, looking to focus on higher-end specialty concoctions, in a move to create more stable earnings. Since 2009, Dow has shed businesses responsible for USD15 billion in annual revenues and Mr. Liveris has suggested the changes are big enough that the company could even drop "chemical" from its name.
DuPont is an American chemical company that was founded in July, 1802. The company manufactures a wide range of chemical products, leading extensive innovative research in this field. The company is the inventor of many unique plastics and other materials, including neoprene, nylon, Teflon, Kevlar, Mylar, Tyvek, etc. DuPont was the developer and main producer of Freon used in the production of refrigeration equipment.
The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber. In 2014, Dow had annual sales of more than USD58 billion and employed approximately 53,000 people worldwide.
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