Dow and DuPont Agree On Merger Parameters

In December of 2015, Dow Chemical Company made an announcement of its plans to merge with the Wilmington, DE-based DuPont.  Apparently it has taken the two a little while (nearly two years) to reach an agreement, but they finally did and now the two companies are merging.  Indeed, the two chemical makers will now be known as DowDuPont, after cementing a deal valued at roughly $62 billion.

More importantly, though, this merger now opens new doors to let the massive company break into there smaller parts; that was actually part of the original arrangement. As a matter of fact, DowDuPont now says it will split into these three parts—an agricultural products maker, a materials science firm, and a specialty components manufacturer—within the next 18 months.

According to Dow chairman and CEO Andrew N. Liveris,“Today marks a significant milestone in the storied histories of our two companies. While our collective heritage and strength are impressive, the true value of this merger lies in the intended creation of three industry powerhouses that will define their markets and drive growth for the benefit of all stakeholders. We will hit the ground running on executing those plans with an intention to complete the separations as quickly as possible.”

The merger will also introduce $3 billion in costs cuts that the newly merged conglomerate is hoping to finalize. A company spokesperson recently recanted that these cuts will, primarily, come from reducing the employee roster (for Dow,a t least) but they did not disclose how many jobs they were looking to cut. Perhaps they are not sure of that yet.

Still, DuPont CEO and chair Edward D. Breen explains, “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.”

The company also made sure to emphasize that it has no plans to leave the Midland area.  Neither company will lose any clout or strength from this merger—perhaps, aside from the proverbial fat-trimming—but, instead, Dow will gain some ground in the materials sciences sector but will shed its electronics and agricultural segments.

For comparison, the last time Dow was involved in a merger, they company reduced its workload by about 11 percent, cutting roughly 700 jobs.

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