​Industrial Chemical Giants Dow and Dupont Discuss $120Mn Merger

Industrial Chemical Giants Dow and Dupont Discuss $120Mn Merger

In discussions with the Wall Street Journal, sources have reported that a potential merger is in the works for industrial companies DuPont (NYSE:DD) and Dow Chemical (NYSE:DOW). The merger would be followed by the division of the conglomerate into three parts for a separate spinoff or sale of each.

The merger would create a $120 billion industrial conglomerate that would result in numerous synergies for the two companies. DuPont and Dow have both been focused on reducing costs in an industry that has seen challenged revenue growth broadly across all specialty industrial segments.

In the third quarter, both companies reported negative revenue growth with sales at DuPont declining by 21% to $4.97 billion. Sales losses were led by Agriculture down 30% from the comparable quarter at $1.1 billion.

Dow Chemical reported revenue of $12.04 billion, down 16% from the prior-year period. Sales losses were led by the firm’s Materials and Chemicals business, down 19% from the comparable quarter.

With terms of the deal expected within the next few days and an extensive regulatory process to follow, there is a high level of uncertainty associated with the merger. The intention to break the company into three parts also adds greater uncertainty.

If completed, the merger would result in a $120 billion industrial conglomerate that would be led by Edward Breen, current CEO of DuPont, and Andrew Liveris, current CEO of Dow Chemical, who would take the role of board chairman. The company would then seek to divide into three parts: agriculture, materials and material sciences and specialty-products.

Both stocks have been trading actively in the market with DuPont up 11.85% and Dow Chemical up 11.93% on Dec. 9. For the year, DuPont is down 0.38%, while Dow Chemical has gained 27.39%. Large shareholder activists have been challenging both companies. Dow Chemical recently added new board members nominated by Third Point. Daniel Loeb (Trades, Portfolio) of Third Point holds a substantial shareholder position in Dow Chemical at 2.03%.

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