Dow Chemical and DuPont reach merger agreement

Dow Chemical and DuPont, the two largest U.S. chemicals companies, have agreed to a USD 130 billion merger of equals, which will be followed by a break-up into three separate businesses.

In an announcement on Dec. 11, the two companies said they expected the new company, to be called DowDuPont, to generate cost savings of USD 3 billion a year, which would add USD 30 billion to the merged company’s market value. The merged company will have a net debt of about USD 18 billion.

DowDuPont plans to maintain two headquarters, at Dow Chemical’s headquarters in Midland, Mich., and DuPont’s in Wilmington, Del.

Dow Chemical CEO Andrew Liveris will become executive chairman of the new entity, while DuPont CEO Edward Breen will become chair and CEO.

Although the merger is expected to face scrutiny from anti-trust regulators in the U.S., the European Union and other parts of the world where they both operate, Liveris and Breen said they do not expect any serious anti-trust problems because there was little overlap in their respective businesses.

The proposed break-up of the merged company would create three more focused businesses: seeds and crop protection, materials, and speciality products and chemicals.

Under the terms of the merger agreement, shareholders of Dow Chemical and DuPont will each own about 50% of the merged company. The exchange ratio of one DowDuPont share is one for every Dow Chemical share and 1.282 for every DuPont share.

Advisers for the transaction were Evercore, Goldman Sachs and Skadden, Arps, Slate, Meagher & Flom for DuPont and Klein and Company, Lazard, Morgan Stanley and Weil, Gotshal & Manges for Dow Chemical.

Dow said it would take full ownership of Dow Corning Corp., which it jointly owns with Corning.