Can Dow Chemical's diamond logo fit inside the oval logo of DuPont Co.? The plastics market soon will find out.
Midland, Mich.-based Dow and DuPont of Wilmington, Del., two global chemical companies with major plastics businesses, announced on Dec. 11 that they will be combining in a merger of equals. A combined DowDuPont — as the firm will be known — will have annual sales of around $83 billion, with a little more than $54 billion coming from Dow and just over $28 billion from DuPont.
Dow President, Chairman and CEO Andrew Liveris will serve as executive chairman of the new firm. DuPont CEO and Chairman Edward Breen — who joined the firm's board earlier this year and became CEO in October — will be CEO of DowDuPont.
“This will create tremendous value for our shareholders and employees,” Liveris said on a Dec. 11 conference call. “It's a tectonic shift in an industry that's been evolving for many years.”
“When I look at Dow and DuPont, I see businesses that fit together like hand and glove,” Breen added on the call. “This is the strongest possible foundation for where the industry and markets are heading.”
DowDuPont then in the next 18-24 months will be split into three separate public companies in order to better capitalize on growth opportunities. Plastics units will be contained in a material science company that by far will be the largest of the three with annual sales of $51 billion.
Liveris will lead the material science firm in addition to his role of executive chairman. He said that about 70 percent of the materials company's sales will come from three key end markets — packaging, transportation and construction.
The material science firm will improve the combined firm's cost position by leveraging Dow's platform in low cost feedstocks, officials said. It also will enhance opportunities to cross-sell in a number of key markets, including packaging, transportation and infrastructure solutions.
An agricultural company will have annual sales of $19 billion and a specialty products company will have annual sales of $13 billion. Dow shareholders will receive one share in DuPontDow for each Dow share they own. DuPont shareholders will get 1.282 shares in the new firm for each DuPont share.
The combination is expected to create annual cost savings of $3 billion. The combined firm also will continue to maintain headquarters in both Midland and Wilmington.
Both companies have been under pressure from activist investors who have argued that the companies' stocks were underperforming.
“Only time will tell whether merging two companies that have individually been pursued by activist investors will discourage further demands from impatient investors — or simply give them one bigger company to chase,” said Phil Karig, an industry veteran who's with the Mathelin Bay Associates LLC consulting firm in St. Louis.