NEW YORK, Dec 12: Two of the oldest names in US industry, Dow Chemical and DuPont, announced Friday that they will merge to create the world's biggest chemical and materials company.
But the all-stock deal creating a business valued at $130 billion would hold only until the new DowDuPont splits into three separate, listed companies with sharper industrial focuses: agriculture, material sciences and specialty products.
Dow and DuPont said the combined company will generate huge savings and strengthen their competitive positions in a world economy beset with overcapacity and low commodity prices.
Until the three-way split, planned for 18-24 months after the merger is completed, it will put DowDuPont ahead of BASF, Germany's global chemicals powerhouse.
The deal also fends off pressure from Wall Street activists who have pushed both Dow and DuPont to generate better returns for investors.
The deal "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," said Andrew Liveris, Dow's chairman and chief executive officer.
The transaction is billed as a merger of equals, although by revenues, Dow -- at $58 billion in 2014 -- is much bigger than DuPont, at $35 billion last year.
By comparison, BASF generated 74 billion euros ($82 billion) in sales in 2014.
By market valuation, though, the more profitable DuPont is slightly larger, $62 billion versus $61 billion for Dow.
Each has more than 50,000 employees worldwide. After the deal is closed -- envisioned in the second half of 2016 and pending antitrust review -- investors of each company will hold equal shares of the combined group.
Liveris will become executive chairman of the new company, while DuPont's chief executive Ed Breen will be his CEO.
The two companies are longtime blue chip stars of US industry.
DuPont was founded in 1802, and became the foundation for one of the country's greatest family fortunes.
Dow is a relative youngster, launched only in 1897. Dow Chemical, known for its Styrofoam brand insulation products, is strongest in the plastics and industrial materials industries. DuPont, creator of Kevlar, used in body armor, is strongest in agriculture and biosciences.
DowDuPont will be headquartered in both Midland, Michigan (Dow's home base) and Wilmington, Delaware (DuPont's home).
Breen told analysts that the two companies would fit together like "hand in glove" with little product overlap.
But the two companies say they expect to produce cost synergies of around $3 billion and approximately $1 billion in growth synergies. DuPont said it will cut staff by 10 per cent following the merger.
The merger however triggered worries that it will give the company oligopolistic powers in areas like seeds for farmers and certain chemicals. ?AFP