Dow, DuPont to Merge in Combination of Chemical Gi 2015-12-17

Once combined and known as DowDuPont, the company plans to split into three companies for agricultural chemicals, material science, and specialty products. The tax-free spinoffs will happen 18 to 24 months after completion of the merger, pending board and regulatory approvals.

The stock-swap transaction will create an actual merger of equals, according to Dow and DuPont, with the shareholders of each company holding about 50 percent of DowDuPont.

Dow also announced that it will take over full ownership of Dow Corning, its 50/50 joint venture with Corning.

Dow Corning, Dow Electronic Materials, and DuPont are all corporate members of SEMI, the industry organization for suppliers of semiconductor equipment and materials.

The $130 billion megamerger is expected to close in the second half of 2016, subject to shareholder and regulatory approval. Andrew Liveris, Dow Chemical’s chairman, president, and chief executive officer, will become executive chairman of DowDuPont, while Edward Breen, DuPont’s chairman and CEO, will serve as CEO of the combined company.

The material science spinoff company will include DuPont’s Performance Materials business and Dow’s Performance Materials and Chemicals, Performance Plastics, and Infrastructure Solutions businesses.

The specialty products spinoff will take in DuPont’s Electronics & Communications business and Dow Electronic Materials.

Jeffrey Stafford of Morningstar wrote this week of the rumored transaction, before the deal was announced, “Potential cost synergies would seem to be the most obvious avenue for value creation. For example, a combined entity could choose only the best products in the agriculture research and development pipeline and shutter the rest. We also wouldn’t be surprised to see job cuts across different divisions.”

Dow’s Liveris said in a statement, “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.”