Dow Chemical DuPont are in advanced talks merge

Dow Chemical and DuPont are in advanced talks to merge

10:26 AM, 9th December 2015
Dow Chemical and DuPont are in advanced talks to merge
Dow Chemical and DuPont are in advanced talks to merge. DuPont CEO Edward Breen, left, is expected to keep that title at the new company, and Dow Chemical CEO Andrew Liveris is expected to be executive chairman. © Photo: WSJ (left), Reuters (right).

NEW YORK, US: Dow Chemical Company and DuPont Company said that they are in advanced talks to merge, in what would be a combination of two of America’s oldest companies that together are worth nearly $120 billion.

The chemical giants, which each have a market capitalization of about $60 billion, could announce a merger in coming days, people familiar with the matter said. It would be followed by a three-way breakup of the combined company, they said, a common approach to mergers and acquisitions of late.

Dow’s chief executive Andrew Liveris is expected to be executive chairman of the new company, with DuPont CEO Edward Breen keeping that title.

Terms of the deal couldn’t be learned, but some of the people said it would be billed as a merger of equals, meaning there wouldn’t be a big premium for either set of shareholders. A deal hasn’t yet been inked and the talks could fall apart, the people cautioned.

Even if the two sides manage to agree, there is no guarantee antitrust regulators would bless the union or that the breakup plan would address any such concerns. The merger would combine two top suppliers of industrial and agricultural chemicals and crop seeds.

This would be one of the biggest in a year marked by big deals. So far, companies have struck some $4.35 trillion of takeovers in 2015, eclipsing 2007 as the top year on record for deals, according to Dealogic.

Before any breakup, the deal would create a giant with more than $90 billion in combined sales and strong positions in everything from plastics to industrial chemicals and agriculture.

Under pressure from shareholders to slim down and focus on faster-growing units, both companies have been restructuring their businesses by shedding some of the products that made them famous.

The deal under discussion would ultimately accelerate the process, with the creation of separate businesses housing the companies’ agricultural, materials and material sciences and specialty-products businesses, some of the people said.

A deal, should one be reached, would come as talks of consolidation in the agricultural-sciences industry have heated up, with companies scrambling to adjust to pressure on lower prices for their commodities.

On the agricultural side of their businesses, analysts have long spoken of the merits of a combination between Dow and DuPont. Together, the companies sell about 17 percent of the world’s pesticides, and would be the third-largest supplier of crop chemicals, according to data compiled by Morgan Stanley. Combined, they would hold 41 percent of the US corn seed business and 38 percent of the soybean market.

The talks come just a month after Wilmington, Del-based DuPont named Breen, a turnaround expert, as the company’s chief executive after a stint as interim CEO. The company’s prior CEO, Ellen Kullman, retired after fending off Nelson Peltz and Trian Fund Management LP, which sought board seats and criticized the company—and its leadership—for bloated corporate spending and a continued failure to hit earnings forecasts.

A deal with DuPont would mark a high point for Liveris’s 11-year tenure at the top of the company. While Dow was rocked by the financial crisis and a deal at that time that nearly sunk the company, his strategy to realign the company’s products has returned the stock to near all-time highs.

© The Wall Street Journal News

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