US companies Dow Chemical and DuPont have agreed to merge in an all-stock deal valuing the combined entity as the biggest chemical firm in the world and fuelling further consolidation in the industry.
The all-stock deal to combine two of the biggest and oldest US chemical producers is reportedly worth $130 billion (118 billion euros), and would prelude an eventual splitting up of the merged entity into three separate businesses, Dow Chemical and DuPont said in a statement Friday.
The new entities would focus on agriculture, specialty chemicals and materials, they said. Dow Chief Executive Andrew Liveris would become executive chairman of the new company, DowDuPont, while DuPont's CEO Ed Breen would be his CEO, the two firms added.
Describing the transaction as a "game-changer," Liveris said it was "the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders."
Under the terms of the deal, Dow Chemical shareholders will get one DowDuPont share for each Dow Chemical share held, while DuPont shareholders will get 1.282 shares in DowDuPont for each DuPont share they own.
The split of the new group is then scheduled to "occur as soon as feasible" and would likely happen 18-24 months after the deal closes, which is expected in the second half of 2016.
Synergies and market share
The two companies hope to produce run-rate cost synergies of around $3 billion and approximately $1 billion in growth synergies with the merger.
The biggest of the three new companies by revenue would be a material science company, which would cater to the packaging, transportation and infrastructure industries. The combined revenue for the materials business was about $51 billion in 2014 on an adjusted basis.
The companies said a new specialty products company would focus on electronics. The combined adjusted revenue of that business was about $13 billion in 2014.
The third business, selling seed and crop protection chemicals, generated adjusted revenue of about $19 billion.
The merger puts further pressure on rivals such as Germany's BASF SE and Bayer AG to consolidate as falling crop prices curb sales. It could also prompt a renewed flurry of takeover bids for European rivals, with Syngenta AG the most likely target.
"The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation," SunTrust Robinson Humphrey analyst James Sheehan told Reuters on Friday. "The question is how does Monsanto respond to the strategic move by two of its main competitors?"
DowDuPont will be headquartered in both Midland, Michigan and Wilmington, Delaware.
uhe/pad (Reuters, AFP, dpa)