Dow Chemical and DuPont plan to combine in an all-stock merger of equals valued at more than $130 billion. The combined company will be named DowDuPont and be dual headquartered in Midland, Michigan, and in Wilmington, Delaware.
Separately, Dow announced Friday that it will become the 100% owner of Dow Corning, which is currently a 50-50 joint venture with Corning. Dow and Corning will maintain their current equity stake in Hemlock Semiconductor Group, according to Dow.
The companies intend to subsequently separate DowDuPont into three independent, publicly traded companies through tax-free spin-offs. This would occur as soon as possible, which is expected to be 18–24 months following closing, subject to regulatory and board approvals.
Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and 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% of the combined company excluding preferred shares. The companies had a combined market capitalization of approximately $130 billion at the announcement.
Upon the completion of the DowDuPont transaction, Dow chairman and CEO Andrew Liveris will become executive chairman of the DowDuPont board, and Ed Breen, chair and CEO of DuPont, will become CEO of DowDuPont. In these roles, both Liveris and Breen will report to the board.
The spin-offs will include the leading global pure-play agriculture company, with revenue of $18 billion based on 2014 sales. The largest business will be a material science company with sales $51 billion, made up of Dow’s current franchise excluding ag and electronic materials plus DuPont’s performance materials business, including engineering plastics and elastomers.
The specialty products company, with revenues of $12 billion, includes DuPont’s electronic and communications, nutrition and health, industrial biosciences, and safety protection business plus Dow’s electronic materials business.
Advisory committees will be established for each of the businesses. Breen will lead the agriculture and specialty products committees, and Liveris will lead the material science committee.
DowDuPont’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors. The full list of directors will be announced prior to or in conjunction with the merger's close. The committees of each company will appoint the leaders of the three new stand-alone companies prior to a contemplated spin-off. The transaction is expected to deliver approximately $3 billion in cost savings within the 24 months following the closing of the transaction. An additional benefit of approximately $1 billion is expected from growth synergies.