Dow Chemical Co. and DuPont said on Friday they have agreed to merge in an all-stock deal that would create a chemicals company with a combined market value of $130 billion.
The combined company, to be called DowDuPont, will subsequently be broken into three companies that will focus on agriculture, material sciences and specialty products.
Under the terms of the transaction, Dow shareholders will get one share of DowDuPont for each Dow share. DuPont shareholders will get 1.282 shares in DowDuPont for each DuPont share. Dow and DuPont shareholders will each own about half of the combined company.
Dow CEO Andrew Liveris will be executive chairman of the new company while DuPont CEO Edward Breen will be chief executive.
“This transaction is a game-changer for our industry,” said Liveris. “This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers,” he added.
The merger is expected to close in the second half of 2016. The subsequent breakup of DowDuPont into three companies is expected to occur 18-24 months after the merger closes.
Breen said the three new companies that will be carved out of DowDuPont will have a clear focus, scale advantages, and focused investments in innovation.
The two companies said that the merger is expected to deliver about $3 billion in cost synergy, with 100 per cent of the run-rate cost synergies achieved within two months following the closing of the transaction. Besides, additional upside of about $1 billion is expected from growth synergies.
Both companies also have significant operations in India.
The local unit of Dow Chemical crossed $1 billion in revenue in 2014. Dow India has a presence in technology development and application research in areas such as infrastructure, transportation, energy, consumer, lifestyle and agriculture.
DuPont India was founded in 1994 and provides offerings across a variety of market segments including agriculture, food and nutrition, healthcare, home and construction, safety and protection including defence, renewable energy, electronics, transportation and infrastructure.
Michael S. Klein’s advisory firm, Klein and Company, Lazard, Morgan Stanley and the law firm Weil, Gotshal & Manges are the advisers to Dow on the transaction.
Evercore, Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom are DuPont’s advisers.