A merger between chemical giants DuPont and Dow is moving forward.
The two companies are calling it a “merger of equals” that will result in a new company, DowDuPont, that’s worth $130 billion. DowDuPont will be the second largest chemical company in the world behind BASF.
Their plan is to split DowDuPont into three independent companies through tax-free spin-offs. The new entities will focus on agricultural chemicals, specialty products and material sciences.
Dow Chemical’s head Andrew Liveris will be the executive chairman of the new company, with new DuPont CEO Ed Breen serving in that same capacity with the DowDuPont.
The company will have dual headquarters in Midland, Michigan and Wilmington, Delaware.
"When I look at DuPont and Dow, I see business that fit together like hand in glove, which gives us the ability to create three highly-focused companies because of the combined assets, capabilities and scale " said Breen on a morning conference call announcing the merger. "We operate in a dynamic global environment and this is the right plan at the right time."
Liveris says he believes it’s the path the two iconic companies need to take to move forward.
“We had to create value for the future, not just value for the current. To be able to do that is not easy," said Liveris. "To put two companies together that are storied names, put the two physically together and them to address their futures is the job in front of us"
The separation into three companies is expected to happen over about 18-24 months after the merger is complete in the second half of 2016. The merger faces a gauntlet of regulatory approval and approval by Dow and DuPont shareholders.
In anticpation of the merger and subsequent restructuring into three companies, DuPont, in a statement, says the new company anticipates laying off approximately 10 percent of its global workforce by the end of the first quarter of 2016. There's no indication yet how may of those cuts will come from DuPont pool of 7,000 workers in the First State.
Gov. Jack Markell (D-Delaware), in a statement Friday morning, committed to helping any Delaware workers affected by the DuPont cuts, and says he'll work to keep the new company in the state.
“I have spoken to DuPont CEO Ed Breen about plans for DowDuPont. We have talked about the great business environment in Delaware and the many talented scientists, engineers and business leaders who call Delaware home and who can be at the center of growth for the three new businesses," said Markell. "We will continue to advocate that Delaware's many advantages can be of major benefit to the new companies."
Delaware Congressional delegation also weighed in on the proposed Dow-DuPont merger and how the First State can absorb would may be a major economic loss.
"This change serves as another stark reminder that we can’t take anything for granted in today’s rapidly evolving economy. And it underscores the need to redouble our efforts that make Delaware a great place for companies to do business and create jobs," said Rep. John Carney (D-Delaware), who is running to replace the term-limited Markell as governor. "I hope and trust that DuPont and Dow will seriously consider the many benefits of retaining business and jobs in Delaware. I will be working hard – along with my delegation counterparts – to make sure they do."
"While the news certainly feels like a warning sign for turbulence ahead, I believe that in adversity lies opportunity. We can sit around, wring our hands and bemoan the hand that Delaware has been dealt – or we can roll up our sleeves, join hands and get to work finding the opportunity within this perceived adversity," said Sen. Tom Carper (D-Delaware) in a statement. “I’ve always believed that one of the major roles of government is to create a nurturing environment for job creation and job preservation. Now, perhaps more than ever, our Congressional Delegation must immediately get to work with Governor Markell, the Delaware legislature, and business and community leaders across the First State to do all that we can to make the best out of this situation. Working together, Delaware can prove that if DuPont and Dow do merge, it’s the smart decision to locate a significant portion of their business here."
"Delaware has a world class workforce and extensive research and development resources that are simply unmatched, and I'm hopeful that DuPont and Dow leaders will continue investing in our state," said Sen. Chris Coons in his own statement. "It isn't yet clear what this merger will mean for Delaware, but as we learn more, my focus will be on the pensioners and employees whose lives could be affected. It's those families and our community I'm concerned about. I look forward to hearing more from DuPont and Dow leaders about what this merger will mean for pensioners, employees, and our state.”
Company officials expect save $3 billion dollars in costs by merging into DowDuPont. They also anticipate bringing in an additional $1 billion through growth.
Dow and DuPont shareholders will each own approximately 50 percent of the combined company, Dow shareholders will receive one share of DowDuPont for each Dow share, and DuPont shareholders will receive 1.282 shares in DowDuPont for each DuPont share.
The new company's board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors. Committees of each company will appoint the leaders of the three new standalone companies before they spin-off.
