How DuPont and Dow Chemical merger could be a ‘game-changer’

Questions swirled about possible layoffs in MI after Dow Chemical Co. said Friday it would combine with its rival DuPont Co.in a $130 billion deal and subsequently spin off tax-free into three independent, publicly traded companies.

Ed Breen the current CEO at DuPont will be the new company’s CEO, while Andrew Liveris the CEO at Dow will become an executive chairman. After finishing the deal, they intend divide into three firms – one focused on one on specialty products, one on material science and agriculture.

Although they’re not splashy consumer brands, Dow Chemical and DuPont manufacture a variety of products that consumers and businesses use every day, including automobiles, apparel, electronics, household goods, personal-care products and safety equipment.

Shares in Dow Chemical closed down 2.8 percent in NY, while DuPont fell 5.5 percent.

The merger is expected to result in major job cuts, as DuPont has said it will shed about 10 per cent of its global workforce in its restructuring ahead of the deal.

The companies said the split would occur as soon as feasible, which is expected to be 18-24 months following the closing of the merger, subject to regulatory and board approval.

Dow Chemical and DuPont: How Will the Mega Merger Come Together?

Nelson Peltz, an activist investor who has been prodding DuPont to break up, and Daniel S. Loeb, who has been doing the same for Dow, have yet to weigh in on the merger.

DuPont and Dow shares were down on Friday after earlier this week soaring on speculation of the merger.

Meanwhile, DuPont completed a spinoff this year of its struggling performance chemicals unit into a separate company called Chemours. The leadership and location of the three eventual companies hasn’t been decided.

Mr. Liveris said there will “almost certainly” be a new leader of the materials company, which could keep the Dow name after it is spun out.

Analysts have said a Dow-DuPont tie-up might push Monsanto Co to take another shot at Syngenta after the US company abandoned a $45 billion offer for the Swiss company in August.

Executives boast that the two companies have complementary offerings in packaging, especially in multilayered structures, where, for example, DuPont’s Surlyn resin might be used with Dow’s linear low-density polyethylene.

Iowa State University management professor David King says what the two companies are proposing is that after they merge, they will then split the behemoth into three distinct companies. The companies said their individual agrochemical operations have scant overlap, and asset sales that would result from the merger should be minor.

DuPont announced a plan that is expected to reduce costs by $700 million in 2016 compared to this year. Dow products include PE resins and its broad portfolio of thermoplastic elastomers, while DuPont’s include nylon, PBT, acetal, thermoplastic elastomers, and biopolymers.

In a separate announcement today, which will further impact the Materials Science business, Dow announced that it had signed definitive agreements to restructure the ownership of Dow Corning.