Dow Chemical-DuPont deal will bond almost $47 billion in retirement assets

After completing the deal, they said they would pursue a split into three companies - one focused on agriculture, one on material science and one on specialty products.

The deal announced Friday is being billed a merger of equals, to be called DowDuPont.

The company was thinking more in terms of surgical stockings when it described "a garment made of yarns having high tenacity and high stretch", exerting "substantial pressure upon the body of the wearer", but the public soon had other ideas. DuPont said it would cut $700 million in costs in 2016, causing an expected pretax charge of $780 million. Combined pro forma 2014 revenue for material science was about $51 billion. Senate Judiciary committee Chairman Chuck Grassley said in a statement Friday that the proposed merger "demands serious scrutiny".

The merger would combine two companies that sell agricultural products to millions of farmers around the world, and make a variety of chemicals for consumer and industrial products ranging from electronics, automobiles, and household goods to building materials and safety equipment.

DuPont's ag business employs more than 12,000 workers, while Dow's employs about 9,000.

Nonetheless, the announcement - which will see Dow shareholders take over 52% of the combined company, and DuPont investors 48% - failed to support the companies' shares, which had already risen in anticipation of the tie-up.

Many of them deals reflect companies' desire to step up growth by giving them added market share, new products or expanded geographic reach.

Dow and DuPont shareholders will each own about 50 percent of DowDuPont, excluding preferred shares.

"The actual products do not overlap hardly at all in these two companies", Breen said in an interview on Bloomberg TV. The company will have dual headquarters in Midland, Michigan, and Wilmington, Delaware, where they are currently based.

DuPont is 213 years old, and makes different products that are used in pharmaceuticals, petrochemicals, food and construction. Mr. Breen said in the interview that the companies plan to divest only minor pieces of their businesses "but nothing that would move the needle".

The impact of the mega-merger between Dow Chemical Co. and DuPont Co., which provide components and systems for every major global automaker, will be felt throughout the automotive supply chain.

It announced on Friday that it would buy the remaining stake in the Corning joint venture.

The transaction is subject to customary closing conditions, including relevant tax options and regulatory approvals.

Dow brings about $7 billion in net sales to the company, while DuPont brings $11 billion.

DowDuPont's board is expected to have 16 members, with each company contributing eight directors, the companies said.

Dow shares stood 2.5% lower at $53.56, and DuPont stock down 5.8% at $70.21, in afternoon deals in New York.

Both Dow and Dupont have operations in West Virginia.

Currently the corporations estimate that the proposed plan will result in cost synergies, mostly in agriculture, of $3 billion, resulting in an additional $30 billion of market value, at a cost of about $4 billion.

 

The new company, DowDuPont, in the future may split off into an agriculture company, a material science company and a specialty products company.