DuPont, Dow Strike $130 Billion Merger Deal, Create Chemical Giant

Chemical giants DuPont and Dow Chemical have agreed to merge, forming a $130 billion company that will then split into three companies.

The new DowDuPont will separate into three companies “as soon as feasible,” which the companies say they expect to take 18 to 24 months following the closing of the merger. The three companies will focus on agriculture, material science and specialty products.

The agriculture company would unite DuPont’s and Dow’s seed and crop protection businesses. Their combined revenue in 2014 was $19 billion.

If the merger is approved, it would be the “first major shake-up in more than a decade for the seed-and-pesticides business,” led by six firms including Monsanto, Syngenta, Bayer and BASF, the Wall Street Journal reports.

While the possible merger puts the focus on agricultural companies, Frost & Sullivan says the overlap between the new company and industry giants like Monsanto is relatively small.

“The combined agro entity will surely become a formidable competition to the likes of companies like Monsanto, but the business and product overlap across their specialty businesses are very few,” says Deepak Karthikeyan, industry manager, Chemicals, Materials & Foods Practice, Frost & Sullivan. “For instance, electronic and display materials is an area where the companies can potentially experience cost benefits and increased market penetration, while other markets such as safety, where Dow is not active, will not see much change.”

However, the new companies’ focus on areas such as polymers, elastomers, composites and photovoltaic materials “can prove to be a game changer in those industries,” Karthikeyan says.

“As of now, Frost & Sullivan expects the merger will face regulatory hurdles across different regions as both companies have a huge global footprint. However, if the merger does go through, it is going to be a big challenge for the non-agro business entities to unlock synergistic value in the short term due to the mere size of the companies themselves and the number of varied industries they focus on.”

Upon completion of the transaction, Andrew N. Liveris, president, chairman and CEO of Dow, will become executive chairman of the newly formed DowDuPont board of directors. Edward D. Breen, chair and CEO of DuPont, will become CEO of DowDuPont.

DuPont will cut staff by 10 percent following the merger, Industry Week reports.