Chemical giants DuPont and Dow Chemical Co have agreed to combine in an all-stock merger valued at $130 billion in a first step toward breaking up into three separate businesses, a move that pleased activist investors and could trigger more consolidation. The deal combines two of the biggest and oldest U.S. chemical producers and will generate cost and tax savings, though it will face intense regulatory scrutiny. Potential tax savings were one reason for the complicated merger-before-breakup deal.
Dow shareholders would own 52 percent of the new company after preferred shares are converted, the companies said. The agreement includes a $1.9 billion termination fee under specified circumstances, such as rejection by shareholders. The merger, one of the biggest of the year, would allow Dow and DuPont to rejig assets based on the diverging fortunes of their businesses.
DuPont, which is 213 years old, makes products used in petrochemicals, pharmaceuticals, food and construction. Its brands include Kevlar and formerly Teflon, now part of Chemours Co, which it had spun off.
The 118-year-old Dow makes plastics, chemicals, hydrocarbons and agrichemicals. It manufacturers Styrofoam insulation products and chlorine products, used in paper, pulp and soap. Dow also will assume full control of silicone products maker Dow Corning, its joint venture with Corning Inc.
Photo Caption: Edward D. Breen (L), chairman and chief executive officer of DuPont, is pictured shaking hands with Andrew N. Liveris, Dow’s chairman and chief executive officer, in this undated hand-out photo provided by DuPont. REUTERS/DuPont/Hand-out via Reuters