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Dow, DuPont merge into chemical giant

posted Dec 17, 2015, 12:39 AM by Chimanlal Maganlal & Co.   [ updated Dec 17, 2015, 12:40 AM ]
Dow Chemical and DuPont have agreed to merge in a $130 billion deal, the companies said on December 11. 

The deal, which is likely to face intense regulatory scrutiny, allows the new company - to be called DowDuPont - to rejig assets based on their diverging fortunes. 

About 18 and 24 months after a merger, DowDupont will be spun off into three independent, publicly traded companies-an agriculture company, a material science company, and a specialty products company, the statement said. 

"This merger makes so much strategic sense", said Jonas Oxgaard, an analyst with Sanford Bernstein, before the deal was officially announced. "They're not underperforming as companies, but there are things they could do better". "Each of these businesses will be able to allocate capital more effectively, apply its powerful innovation more productively, and extend its value-added products and solutions to more customers worldwide", said Edward D. Breen, chairman and chief executive officer of DuPont. 

Combined pro forma 2014 revenue for specialty products was approximately $13 billion. DowDuPont would be headquartered in Midland, Michigan, and Wilmington, Delaware. The transaction, the statement said, is expected to save $3 billion over the two years after the transaction is closed. 

The deal is expected to close in the second half of 2016, with the segmentation taking place up to two years later. DuPont expects to record a pretax charge of about $780 million, with approximately $650 million of employee separation costs. DuPont shareholders will receive 1.282 DowDuPont shares for each of their shares.