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Dow & DuPont Merger: US Chemical Industry on Turning Point

On 11th December, 2015, two giants of the global chemical industry, Dow Chemical Co. and DuPont Co., entered into an agreement for an all-stock merger to form a new company, which would be name as ‘DowDuPont’. The headquarters of the new company would be located at two locations – at Midland, Michigan and at Wilmington, Delaware. Dow Chemical Co., which was founded in 1857 recorded net sales worth USD58.17 billion in 2014 while DuPont Co., which was founded in 1802 generated revenues worth USD28.41 billion in the same year. At the time of announcement, the combined market capitalization of the two companies was valued at USD130 billion. Dow Chemical Co. is a leader in plastics and chemicals segment while DuPont is a major player in the specialty products category. The merger between these two companies is being been hailed as the largest deal in the global chemical industry in 2015. The shareholders of each company would control 50% of the shares of DowDuPont. Andrew N. Liveris, the President, Chairman and CEO of Dow Chemical would be name the Executive Chairman of the new company while Edward D. Breen, the chair of the board and CEO of DuPont would be named the CEO of the company. The companies also revealed their plans to split DowDuPont into three businesses, namely, material sciences, specialty products and, seeds & agrochemicals in a span of 18 to 24 months after the closure of the planned merger. The leaders of these companies would be chosen by the board members of Dow Chemical Co and DuPont Co. In particular, the merger of these two companies is expected to have a strong impact on the global seeds and pesticides business, which is controlled by a limited number of players.                       

 

According to TechSci Research “the new company is anticipated to generate massive savings and fortify their competitive positions in the global chemical industry. The spin off companies from the splitting of DowDuPont would receive tax free treatment under the U.S. Internal Revenue Code if Dow Chemical Co. and DuPont Co. do not undergo a formal change in control. This move is expected to result in tax savings of more than USD3 billion which would improve the profitability of both the companies”.

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