DuPont and Dow Chemical to combine in merger of equals

DuPont and The Dow Chemical Company have announced that their boards of directors unanimously approved a definitive agreement under which the companies will combine in an all-stock merger of equals.

The combined company will be named DowDuPont. The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs. This would occur as soon as feasible, which is expected to be 18-24 months following the closing of the merger, subject to regulatory and board approval.

The companies will include a leading global agriculture company, a leading global material science company, and a leading technology and innovation-driven speciality products company. Each of the businesses will have a clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages and focused investments in innovation to better deliver superior solutions and choices for customers, the firms said.

'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 chairman and Chief Executive Officer. 'During 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, Chairman and Chief Executive Officer 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,' he added.

Highly synergistic transaction

On closing of the transaction, the combined company would be named DowDuPont and have a combined market capitalisation of approximately US$130bn. The transaction is expected to deliver approximately $3bn in cost synergies, with 100% of the run-rate cost synergies achieved within the first 24 months following the closing of the transaction. Additional upside of approximately $1bn is expected from growth synergies.

It is the intention of both companies' boards of directors that, following the merger, DowDuPont would pursue a tax-free separation into three independent, publicly traded companies with each targeting an investment grade credit rating. Each would be a strong, focused business with powerful innovation capabilities, enhanced global scale and product portfolios, focused capital allocation and a distinct competitive position.

Management and governance

On completion of the transaction, Liveris, President, Chairman and CEO of Dow, will become Executive Chairman of the newly formed DowDuPont Board of Directors and Breen, Chair and CEO of DuPont, will become Chief Executive Officer of DowDuPont. In these roles, both Liveris and Breen will report to the Board of Directors. In addition, when named, the Chief Financial Officer will report to Breen.

Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware. The merger transaction 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.