Dow and DuPont Confirm 130B Merger; 5,000+ Jobs to be Cut
WILMINGTON, DE and MIDLAND, MI – It looks like we’re getting one last mega merger before we hit the New Year.
DuPont and Dow Chemical, two of America’s oldest agriculture chemical companies, have officially reached a deal to combine in a “merger of equals” with a market capitalization of approximately $130 billion. The new company, DowDuPont, would become the second-largest chemical company in terms of revenue following BASF Germany with a combined $92 billion in sales.
DowDuPont will subsequently split into three independent, publicly traded businesses, consisting of a $19 billion (yearly sales) agriculture chemicals company, a $51 billion material science company, and a $13 billion specialty products company, according to a press release.
According to the Wall Street Journal, Dow and DuPont would control 17% of the global market share for crop protection. For comparison, Syngenta controls 21%, with Bayer at 20%, BASF at 13%, and Monsanto at 9%.
Jeffrey Stafford, an analyst with Morningstar, said that breaking into three separate companies would “give Dow and DuPont the ability to choose the best products in their research pipeline and shutter the rest,” the New York Times reports.
It’s expected that up to 10 percent of DuPont’s global work force, or more than 5,000 employees, would be affected by job cuts as a result of this merger. In a separate statement, DuPont announced a 2016 global cost savings and restructuring plan designed to reduce $700 million in costs compared with 2015. Approximately $650 million of those costs are related to employee separation costs.
Andrew N. Liveris, Dow’s Chairman and CEO, has been named Executive Chairman of the combined company, while DuPont’s CEO Edward D. Breen will retain his position.
“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 Liveris. “This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers.”
Breen echoed Liveris’ statement, saying, “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.”
Dow also announced that it intends to restructure its ownership with Dow Corning. Dow will become the 100% owner of Dow Corning, currently a 50:50 joint venture between Dow and Corning.
With a merger of this scale, it goes without saying that antitrust regulators will heavily scrutinize the deal. Perhaps, however, splitting the combined company into three separate businesses may ease some antitrust concerns.
Shares in DuPont fell this afternoon, decreasing 5.10% to $70.75. Dow also saw a decrease, dropping 2.70% to $53.43.
Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware. The transaction is expected to close in the second half of 2016.
