Dow, DuPont to Merge, Then Create 3 Companies

U.S. chemical giants Dow Chemical Co. and DuPont Co. have agreed to merge and then divide into three independent companies that focus on agriculture, specialty chemicals and material science.

It isn’t clear where the companies’ automotive operations, which together generate annual revenue of about $3 billion, would fit in the final three-company structure.

The all-stock merger of equals will create a company called DowDuPont with a market capitalization of about $130 billion. Pending regulatory approvals, the merger is expected to be finalized in the second half of 2016.

Over the following two-year period, the merged company intends to form a trio of three publicly traded companies, each with its own business plan, capital structure and product strategy. The three companies and their estimated annual revenue would be:

• Material Science ($51 billion). Includes the performance materials operating units of both companies, except for Dow’s electronic materials business.
• Agriculture ($19 billion). Integrates the seed and crop protection businesses of both companies.
• Specialty Products. ($13 billion). Combines Dow’s electronic materials unit and DuPont’s nutrition and health, industrial biosciences, safety and protection, and electronics and communications businesses.

Andrew Liveris, currently Dow chairman, would be DowDuPont’s executive chairman, heading a 16-member board equally represented by directors from Dow and DuPont. Edward Breen, currently chairman and CEO of DuPont, would become CEO of the combined companies. DowDuPont proposes to maintain dual headquarters in Wilmington, Del., and Midland, Mich.

Liveris would lead the transition team that creates the material science spinoff. DuPont’s Breen would head teams for the other two companies.

Under terms of the deal, Dow shareholders would exchange shares for DowDuPont stock at a 1:1 ratio. DuPont shareholders would receive 1.28 shares in the new company for every DuPont share they currently hold. Upon completion, Dow and DuPont shareholders each would own about 50% of the new company, excluding preferred shares.

The companies estimate their combination will generate $3 billion in “cost synergies,” meaning staff and facility reductions, within 24 months and another $1 billion in longer-term growth synergies.