Merger Plans of Dow and DuPont – What are the expectations from the merger?

Dow Chemicals and DuPont are two historic giants in the chemical industry in US with significant presence in the market for a very long time. Dow Chemical Co. was founded in 1897 and has been one of the largest chemical manufacturers in the world in terms of revenue and market capitalization. Dow operates with 53000 workers in 160 countries in the world, manufacturing agricultural products, chemicals, plastics, crude oil and natural gas.  It is looking for new projects in the Middle East and Asia due to pressure of regulation in the US and Europe. DuPont is also an American Chemical Company, founded in 1802, much earlier than Dow Chemical Co., and has the credit of developing many polymers, Freon gas for the refrigeration industry and synthetic pigments and paints. It has a workforce of 63000 across the world. It was the 4th largest company in the world in 2014 in terms of market capitalization and 8th in terms of revenue.

 

What is the merger?

In spite of being the major players in the US industry individually, both the companies have planned to join hands in an all-stock merger and become the most dominant player in the industry with a unified name ‘DowDuPont’. They also planned to break the company into three parts under the umbrella of DowDuPont.  The new company ‘DowDuPont’ will be owned 50-50 by the current shareholders of the two companies. Under the new setup, Andrew Liveris, the CEO of Dow will take over as Executive Chairman and Ed Breen, the CEO of DuPont will be the chief of the new company. The new company will be a $130 billion company combining the products of both the Dow and DuPont companies in the areas of agriculture, chemicals and specialty products. The investors of the new company ‘ DowDuPont’ will get one share of the new company for each Dow share and 1.282 DowDuPont share for each one of DuPont. Later on the DowDuPont company is going to be divided into three independent, publicly traded companies through tax-free spin-offs.  The merger will make the new company as the world’s top chemical company with market capitalization of $130 billion and revenue as $93 billion. The company will be the top company in comparison to its rivals Bayer (Germany), BASF (Germany), Saudi Basic (Saudi Arabia) and Lyondell Basell (US).

 

What is expected from the merger of Dow and DuPont into DowDuPont?

There are many expectations for the two companies from the planned merger. According to a report published in TOI (December 12, 201), some of them are:

  • A cost saving of $3 billion.
  • The new company DowDuPont will be largest company with $130 billion entity.
  • Reduction in staff will be a great cost saving. DuPont expect a cut in the workforce by 10 percent.
  • Expected additional earnings of $ 1 billion.
  • Merger would be able to compete better with the rivals such as Syngenta, AG; Monsanto and Bayer, AG.
  • Bringing together the innovation and material science leaders.

Andrew Liveris, the CEO of Dow Chemical Co. said that “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”.

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