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Dow, DuPont to Unite in $130B Deal

Monday, December 14, 2015

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Coatings and chemical giants The Dow Chemical Company and DuPont Co. announced Friday (Dec. 11) that they are merging in a deal valued at $130 billion.

The proposed transaction, subject to antitrust regulatory approval, is expected to close in the second half of 2016, the companies said in a joint announcement.

Dow and DuPont
DuPont Co.

Upon the deal’s close, DuPont CEO Edward Breen (left) will serve as DowDuPont’s CEO and Dow’s CEO Andrew Liveris (right) is to become executive chairman of the new company.

The giants plan to form DowDuPont, and then split into three separate independent, publicly traded companies focused on material science, agriculture and specialty products.

The transition and split will occur 18-24 months after the deal closes, the companies reported.

Dow also separately announced a restructuring of Dow Corning Corp., a partnership established in 1943 to develop the potential of silicones.

 ‘Game-Changer’

“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,” Andrew N. Liveris, Dow’s president, chairman and CEO, said in a statement.

“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.”

The announcement comes as both companies have faced increasing pressure from stakeholders to streamline their portfolios, reports say.

Paint
©iStock.com / Nastco

Dow Coating Materials business serves the architectural and industrial markets.

The companies said the merger would deliver approximately $3 billion in cost synergies within the first two years.

The deal will also result in major job cuts, the Wall Street Journal reported. Specifically, DuPont said it would be cutting about 10 percent of its global workforce in restructuring ahead of the deal with more reductions likely, the report stated.

Leadership and Location

If approved, Liveris will become executive chairman of the combined company and DowDuPont’s CEO will be Edward D. Breen, the current chairman and CEO of DuPont, the joint statement indicated.

Both will report to the 16-member DowDuPont Board of Directors. Each company will contribute eight directors to the board. The full list of directors will be announced prior to or at the same time of the closing of the proposed merger, according to the companies.

DowDuPont will be dual headquartered in Midland, MI, and Wilmington, DE.

3 Spin-offs

The deal would create three independent entities.

The largest of the entities will be the Material Science Company, which will consist of the following:

  • DuPont Performance Materials segment;
  • Dow Performance Plastics;
  • Dow Performance Materials and Chemicals;
  • Dow Infrastructure Solutions; and
  • Dow Consumer Solutions (excluding the Dow Electronic Materials business) operating segments.

Dow’s Performance Materials and Chemicals segment includes Polyurethanes and other raw material units. Dow’s Infrastructure Solutions segment includes Dow Building & Construction and Dow Coating Materials businesses.

Dow Building Solutions
Dow Building Solutions

Dow's Infrastructure segment includes Building Solutions, Construction Chemicals and Dow Coating Materials.

Industries served by this mega spin-off will be wide-ranging and include packaging, transportation, infrastructure, and construction among others.

Combined adjusted revenue for the materials business was approximately $51 billion in 2014, the companies reported.

Second, the new Specialty Products Company will include DuPont’s Nutrition & Health, Industrial Biosciences, Safety & Protection and Electronics & Communications segments, as well as Dow’s Electronic Materials business.

Combined adjusted revenue for Specialty Products was approximately $13 billion in 2014.

Lastly, the new Agriculture Company would unite the company’s seed and crop protection businesses. The combined portfolio generated revenue of $19 billion in 2014.

Additional details about the merger as well as a webcast is available at the microsite, http://www.dowdupontunlockingvalue.com/.

Dow Corning Announcement

In a separate announcement, also made Friday, Dow Chemical said it plans to restructure the ownership of Dow Corning Corp.

Dow Corning
Dow Corning

Dow announced plans to purchase the remaining stake in company’s 50-50 joint venture with Corning Inc.

Dow has agreed to buy the remaining stake in company’s 50-50 joint venture with Corning Inc.

“Today represents the transition of a very successful 72-year partnership between Dow and Corning,” Liveris said in a statement, noting that the companies would still maintain joint ownership in Hemlock Semiconductor Group, a provider of polycrystalline silicon and other silicon-based products used in solar cells and other devices.

The restructuring will allow Dow to extend its participation in Consumer Solutions and Infrastructure Solutions segments by increasing its product offerings in a variety of end-use applications, such as building and construction, consumer care and automotive, the company said.

The transaction, expected to close the first half of 2016, is projected to result in more than $1 billion in annual EBITDA at full run-rate synergies.

Dow Corning’s headquarters will remain in Auburn, MI.

   

Tagged categories: Business operations; Dow Building Solutions; Dow Chemical Company; Dow Coating Materials; Dow Construction Chemicals; Dow Corning; DuPont; Mergers

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