Dow, DuPont announce ‘merger of equals’ and split-up into three businesses



Edward D. Breen, Andrew N . Liveris
Edward D Breen, left and Andrew N Liveris

Dow Chemical Co. and DuPont will combine and split up into three businesses under a deal announced Friday morning.

The transaction received unanimous approval from the boards of both companies.

News of the possible merger surfaced earlier this week in a Wall Street Journal story, with shares of both companies rising more than 10 percent. As a merger of equals with a long time-frame a sharp increase in stock prices is not expected in the short term.

Statement from the governor

The state is bracing for more layoffs at DuPont.

Gov. Jack Markell issued the following statement;

“Delaware has been home to DuPont’s global headquarters for more than 200 years and to an important Dow Electronics Materials business for decades. These are world class companies whose merger has the potential to spawn three well-positioned competitors in the agriculture, material sciences and specialty products sectors.

“I have spoken to DuPont CEO Ed Breen about plans for DowDuPont. We have talked about the great business environment in Delaware and the many talented scientists, engineers and business leaders who call Delaware home and who can be at the center of growth for the three new businesses. We will continue to advocate that Delaware’s many advantages can be of major benefit to the new companies.

“None of this, of course, is of any solace for the workers and families who will be affected by this transition. The state is committed to supporting those affected by DuPont’s cost cutting in Delaware.”

Dual headquarters

The company will maintain dual headquarters in Wilmington and Midland, MI. and will undergo a lengthy approval process that could take two years.

DuPont is believed to have  about  7,000 employees in Delaware, with Dow having a few hundred at its polishing materials operation that was founded in Delaware as Rodel.

Over the years, DuPont has reduced its presence in the state after employing as many as 25,000 three decades ago.

Family members and the company had a presence in all areas of state life, including the University of Delaware the state’s two largest newspaper and even in Dover , where Pete duPont served as governor and helped move the state’s economy toward financial services.

That helped cushion the blow of continued job cuts.

Earlier this year, it spun off its Performance Chemical operation into publicly traded Chemours. That company subsequently closed the long-running Edgemoor site.

The combined company will be named DowDuPont.

The deal includes a split-up  of DowDuPont into three independent, publicly traded companies through tax-free spin-offs.

Long time frame for merger

This would occur during the next 18 to 24 months, subject to regulatory and board approval. The companies, which operate worldwide could see scrutiny from U.S and European regulators, given the combined market shares of some of the businesses.

The companies will include an agriculture company; a play material science company and a specialty products company.

CEOs tout deal

“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 Andrew N. Liveris, Dow’s CEOI.  “Over the last decade our entire industry has experienced tectonic shifts as an evolving world presented complex challenges and opportunities – requiring each company to exercise foresight, agility and focus on execution. This transaction is a major accelerator in Dow’s ongoing transformation, and through this we are creating significant value and three powerful new companies. This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers.”

“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. Each of these businesses will be able to allocate capital more effectively, apply its powerful innovation more productively, and extend its value-added products and solutions to more customers worldwide,” said Edward D. Breen, CEO of DuPont. “For DuPont, this is a definitive leap forward on our path to higher growth and higher value. This merger of equals will create significant near-term value through substantial cost synergies and additional upside from growth synergies. Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each business will be a leader in attractive segments where global challenges are driving demand for these businesses’ distinctive offerings.”

Upon closing,   combined company would be named DowDuPont and have a combined market capitalization of about $130 billion.

Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share. Dow and DuPont shareholders will each own approximately 50 percent of the combined company.

The transaction is expected to deliver about $3 billion in cost savings. Approximately $1 billion to accumulate   from growth in sales.

About the three companies

The release from Dow and DuPont described the three companies as follows:

  • Agriculture Company: Leading global pure-play agriculture company that unites DuPont’s and Dow’s seed and crop protection businesses. The combined entity will have the most comprehensive and diverse portfolio and a robust pipeline with exceptional growth opportunities in the near-, mid- and long-term. The complementary offerings of the two companies will give growers across geographies with a broad portfolio of solutions and greater choice. Combined pro forma 2014 revenue for Agriculture is about $19 billion.
  • Material Science Company: A pure-play industrial leader, consisting of DuPont’s Performance Materials segment, as well as Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions, and Consumer Solutions (excluding the Dow Electronic Materials business) operating segments. The combination of complementary capabilities will create a low-cost, innovation-driven leader that can provide customers in high-growth, high-value industry segments in packaging, transportation, and infrastructure solutions, among others with a broad and deep portfolio of cost-effective offerings. Combined pro forma 2014 revenue for Material Science is approximately $51 billion.
  • Specialty Products Company: A technology -driven innovative leader, focused on unique businesses that share similar investment characteristics and specialty market focus. The businesses will include DuPont’s Nutrition & Health, Industrial Biosciences, Safety & Protection and Electronics & Communications, as well as the Dow Electronic Materials business. Together, their complementary offerings create a new global leader in Electronics Products, and each business will benefit from more targeted investment in their productive technology development and innovation capabilities. Combined pro forma 2014 revenue for Specialty Products is approximately $13 billion.

Advisory Committees will be established for each of the businesses. Breen will lead the Agriculture and Specialty Products Committees, and Liveris will lead the Material Science Committee. These Committees will oversee the respective businesses, and will work with Liveris and Breen on the intended separation of the businesses into independent, standalone entities.

When the merger is completed, Dow’s Liveris will become Executive Chairman of the newly formed DowDuPont Board of Directors and Breen will become Chief Executive Officer of DowDuPont. In these roles, both Liveris and Breen will report to the Board of Directors. Also, when named, the chief financial officer will report to Breen.

16 directors coming on board

DowDuPont’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors. Following the closing of the transaction, DowDuPont will be headquartered in both  Midland and  Wilmington.

The merger is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals, and approval by both Dow and DuPont shareholders.

The separation of DowDuPont, which the companies intend to pursue, would be expected to occur 18-24 months following the closing of the merger.

Climax to a difficult year

The merger brings to a climax a turbulent year for the company that saw a proxy battle with activist investor Nelson Peltz, who wanted to see DuPont split up. Peltz failed in his effort to win a seat on the board in what appeared to be a personal battle with DuPont CEO Ellen Kullman, who grew up in Wilmington.

Kullman later retired and by some accounts forced out by the DuPont board, with Breen taking the post. A Wall Street Journal story earlier this week indicated that Dow had approached DuPont. However, Kullman had not been interested in a merger.

Liveris has been under fire for years by activist investors  for his management of Dow that included charges that he paid too much for Rohm and Haas.

It is possible that those investors will eventually demand a further break-up of  the three companies that will emerge from the merger. Other than the agriculture side, the two other entities would come with  a collection of businesses, some of which might be worth selling off.

A copy of a  investor presentation on the merger  will be made available on both companies’ Investor Relations websites. Additional information regarding the transaction can be found on

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