Two giants in the crop input industry — The Dow Chemical Co and DuPont — have announced they’re joining forces in a “merger of equals.” After combining, the new company would be split into three independent businesses.
The new company would be named DowDuPont, with the intention of separating the merged entity into three publicly-traded companies specializing in either agriculture, material science or specialty products. They plan to have one of these three businesses become a “global pure-play agriculture company that unites DuPont’s and Dow’s seed and crop protection businesses.” The split is expected to occur within 18-24 months of the closing of the merger, subject to regulatory and board approval.
Combined market capitalization of the two companies is assessed at approximately US$130 billion. Based on 2014, the companies say the ag division would have revenue of around US$19 billion and cost synergies worth $1.3 billion. Dow and DuPont shareholders would each own approximately 50 percent of the combined company, excluding preferred shares.
“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 Liveris, Dow’s chairman and chief executive officer, in a joint statement issued Friday morning.
Liveris would be named executive chair of DowDupont, while DuPont’s chair and CEO Edward Breen would be the CEO of the combined company.
“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 Breen, who would also oversee an advisory committee for the formation of the new agriculture company.
DuPont also announced a plan to cut company costs by $700 million for 2016 on Friday morning. The plan is expected to impact 10 percent of DuPont’s global workforce and cost around $650 million in employee separation costs. DuPont employed a reported 63,000 employees at the end of 2014, while Dow employed 53,000 people worldwide in 2014.
The deal is subject to shareholder and regulatory approvals, and will likely face rigorous anti-trust scrutiny.
The president of the U.S. National Corn Growers Association said they’re going to be taking a close look at the arrangement.
“We anticipate that we will have an opportunity to submit comments regarding the effect this merger may have on agricultural research, innovation, grain marketing, and the competitive pricing of farm inputs. We will do all we can to protect farmer interests and preserve an open and competitive marketplace,” said Chip Bowling in response to the DowDuPont announcement.
The deal is projected to close in the second half of 2016. DowDuPont would have duel headquarters in Midland, Michigan and Wilmington, Delaware.
More to come.