The proposed merger of the Dow and DuPont global chemicals businesses could lead to the combination of all the agriculture interests into a single, focussed division which itself could be spun off as an independent business in future.
The Dow Chemical Company and DuPont boards have confirmed recent speculation by unanimously approving a merger of equals into a $130 billion company called DowDuPont. Subject to regulatory approvals, this could be in place by mid-2016. Once merged, the assets would be divided into three business units – Agriculture, Material Science and Specialty Products comprising technology and innovation driven activities.
The intention is for each of these to be spun off through tax free independent public offers within 18-24 months of the original merger, again subject to regulatory and board approvals. “Each of the businesses will have clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages, and focused investments in innovation to better deliver superior solutions and choices for customers,” say the prospective partners.
The potential Agriculture Company would combine DuPont and Dow’s seed and crop protection businesses into a single $19bn business based on 2014 revenues. It would have “the most comprehensive and diverse portfolio and a robust pipeline with exceptional growth opportunities in the near, mid and long-term. The complementary offerings of the two companies will provide growers across geographies with a broad portfolio of solutions and greater choice,” says a statement. Dow owns the Pioneer seed brand and DuPont the Danisco feed additive portfolio, although it is not clear whether this would be part of the Agriculture division
Monsanto is the world’s biggest crop protection business with sales of $15.85bn in 2014, followed by Syngenta at $15.1bn, although Monsanto has spent much of the year pursuing the Swiss multinational.
Dow president, chairman and chief executive Andrew Liveris will become executive chairman of the DowDuPont board, with Edward Breen, currently chairman and chief executive of DuPont, becoming the chief executive of the merged business. The new board will comprise 16 directors, eight from each partner.
Advisory Committees will be established for each of the three business units. Mr Breen will lead the Agriculture and Specialty Products Committees which will oversee the respective businesses and work on their intended separation into independent, standalone entities. These committees will appoint the leaders of the three new standalone companies ahead of any spin-off.
“This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders,” says Mr Liveris. “It is a major accelerator in Dow’s ongoing transformation, and through this we are creating significant value and three powerful new companies. This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers.”
Mr Breen adds: “This is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the combination of two highly complementary global leaders and the creation of three strong, focused, industry-leading businesses. 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. For DuPont, this is a definitive leap forward on our path to higher growth and higher value. This merger of equals will create significant near-term value through substantial cost synergies and additional upside from growth synergies. Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each business will be a leader in attractive segments where global challenges are driving demand for these businesses’ distinctive offerings.”