Midland-based Dow Chemical confirms it is merging with Delaware-based DuPont in a deal that would make the two companies the world's second-largest chemical company, behind BASF, with assets worth about $130 billion dollars. Read the press release from Dow Chemical here.
The merger was unanimously approved by Dow's board of directors, and while it is still subject to regulatory approval, would create a company called DowDuPont with plans to eventually split into three separate companies. Those companies would happen as soon as feasible, which is expected to be 18-24 months after the merger is done. One of those companies would focus on agriculture, another on material science and the third would be a specialty products company.
“This transaction is another milestone aligned to Dow’s strategic agenda to provide clarity on our joint ventures and demonstrates our ongoing and relentless focus on creating shareholder value,” said Andrew N. Liveris, Dow’s chairman and chief executive officer. “Today represents the transition of a very successful 72-year partnership between Dow and Corning and our strong relationship with Corning will continue through Hemlock Semiconductor. Dow is the natural owner of Dow Corning. Fully aligned to our portfolio strategy, the addition of a silicones position will expand our product offerings across multiple businesses while driving innovative solutions that will enable us to go deeper into key end markets by leveraging Dow’s existing, strong science and engineering competencies across new chemistries.”
Under the terms of the deal, Dow shareholders will get a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share. DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share. Dow and DuPont shareholders will each own approximately 50 percent of the combined company, on a fully diluted basis, excluding preferred shares.
As part of the deal both companies are taking restructuring steps. DuPont announced plans to reduce $700 million in costs that include employee and contractor layoffs, affecting about 10 percent of the company's workforce. Dow Chemical's Chief Operating Officer, Jim Fitterling, tells TV5 that lay-offs haven't been ruled out. But he refused to speculate further about a possible timeline or number of people impacted.
Dow CEO Andrew Liveris would be executive chairman of the new company, which could happen in the second half of next year. DuPont Chairman and CEO Edward Breen will be CEO. The companies will have dual headquarters in Midland and Wilmington, DE, and will have a board of 16 directors, consisting of eight current DuPont directors and eight current Dow directors.
“Today’s announcement represents the next step in the evolution of our portfolio to drive higher, more stable earnings with a world leading silicone technology platform,” said Howard Ungerleider, Dow’s vice chairman and chief financial officer. “It demonstrates our continued focus on investing in value streams that will deliver profitable growth aligned to high-margin end use markets.”
Dow Chemical also announced it will become the 100 percent owner of Dow Corning, with Corning's corporate headquarters remaining in Auburn. Dow and Corning will maintain their current equity stake in Hemlock Semiconductor Group. Dow, which has been an equal owner with Corning since 1943, expects the move to close in the first half of 2016. Read the full press release from Dow on that here.
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