Following all-stock merger of equals new company will be named DowDuPont
US specialty chemicals companies DuPont and Dow Chemical have announced they are to merge to form a combined company called DowDuPont, with the deal expected to close in Q2 2016.
After completion, DowDuPont will have a combined market capitalisation of approximately $130bn. Cost synergies are expected to be roughly $3bn, with 100% of the run-rate cost synergies made in the first two years. Roughly $1bn in growth synergies are also forecast.
Currently, a plan is in the pipeline to separate DowDuPont into three spin-off companies, representing different business focuses: agriculture, material science and specialty products. Each of the three companies will be independent and publicly-traded.
Andrew Liveris, Dow's President, Chairman and CEO, 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. 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."
Meanwhile, Edward Breen, Chairman and CEO of DuPont, said: “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. 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."
Under DowDuPont’s new Material Science Company will fall DuPont’s Performance Materials business, 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 Material Science Company generated the largest pro forma 2014 revenue of all of the three new companies – approximately $51bn.
Following the merger, Liveris will become Executive Chairman of DowDuPont Board of Directors, while Breen will become CEO of DowDuPont. The new company will be headquartered in both Michigan and Delaware in the US.