By David Benoit By Dana Cimilluca, Dana Mattioli and Jacob Bunge
Dow Chemical Co. and DuPont Co. are in advanced talks to merge,
in a tie-up that would cap off the strongest year ever for
takeovers and would come amid a surge of deal activity in the
agriculture industry.
The chemical giants, which have a market capitalization of about
$60 billion each, could announce a merger in coming days, people
familiar with the matter said. It would be followed by a three-way
breakup of the combined company, they said, a common approach to
mergers and acquisitions of late. Dow's Chief Executive Andrew
Liveris is expected to be executive chairman of the new company,
with DuPont Chief Executive Edward Breen keeping that title. A deal
has not yet been inked and the talks could fall apart, the people
cautioned.
Should it come to fruition, a combination of the companies, each
more than a century old, would be one of the biggest in a year
marked by big deals. So far, companies have struck some $4.35
trillion of takeovers in 2015, in recent days eclipsing 2007 as the
top year on record for deals, according to Dealogic.
It would create a giant with more than $90 billion in combined
sales and strong positions in everything from plastics to
industrial chemicals and agriculture.
Under pressure from shareholders to slim down and focus on
faster-growing units, both companies have been restructuring their
businesses by shedding some of the products that made them
famous.
The deal under discussion would ultimately accelerate that
process, with the creation of separate businesses housing the
companies' agricultural, materials and material sciences, and
specialty-products businesses, some of the people said.
A deal, should one be reached, would come as talk of
consolidation in the agricultural-sciences industry have heated up,
as companies scramble to adjust to pressure on lower prices for
their commodities.
Last month, The Wall Street Journal reported that DuPont was
discussing a potential combination of its agriculture division with
seed giant Syngenta AG, and separately exploring a potential
alternative agriculture deal with Dow. Monsanto Co. earlier this
year abandoned a $46 billion bid for Syngenta amid resistance from
the Swiss company.
Dow's Mr. Liveris has for more than a decade sought a deal with
DuPont, and reached out to Mr. Breen quickly after Mr. Breen took
the top job at DuPont in October, some of the people said. He
pitched a deal as a way to find synergies before breaking up the
businesses into more focused operations, the people said.
On the agricultural side of their businesses, analysts have long
spoken of the merits of a combination between Dow and DuPont.
Together, the companies sell about 17% of the world's pesticides,
and would be the third-largest supplier of crop chemicals,
according to data compiled by Morgan Stanley. Combined, they would
hold 41% of the U.S. corn seed business and 38% of the soybean
market.
In addition to agricultural products, the companies also have
divisions that make films, coatings, packaging technologies and
other materials used in the food, pharmaceutical, industrial and
automotive sectors. DuPont's stable of goods includes Kevlar fibers
and Corian countertops, while Dow's encompasses Styrofoam
insulations and sunscreen chemicals.
Both companies are U.S. institutions. DuPont was started by a
French gunpowder maker named E.I. du Pont, who came to America in
1800 and broke ground on his first powder mills not long after. Dow
was founded by electrochemical pioneer Herbert Henry Dow in
1897.
More recently, the two companies have looked to reshape their
businesses to shed low-margin assets, made from oil and
petrochemicals, in favor of higher-margin specialty products.
DuPont has exited performance paints and coatings, including the
business that invented Teflon non-stick pan coating. Dow,
meanwhile, has gotten out of selling materials like chlorine and
the epoxy used in everything from space travel to Ziploc bags.
The talks come just a month after Wilmington, Del.-based DuPont
named Mr. Breen, a turnaround expert, as the company's chief
executive after a stint as interim CEO. The company's prior CEO,
Ellen Kullman, retired after fending off Nelson Peltz and Trian
Fund Management LP, which sought board seats and criticized the
company--and its leadership--for bloated corporate spending and a
continued failure to hit earnings forecasts.
Trian ran a lengthy proxy fight that DuPont defeated, but
DuPont's stock price continued to sag and is currently down nearly
10% for the year . Mr. Breen recently said the company was weighing
deals with rivals.
Last month, Mr. Liveris said his company is exploring deal
possibilities for its agriculture division, which had $7.3 billion
in sales last year.
Dow has also had an activist investor. Last year, the company
added two directors nominated by Daniel Loeb's Third Point LLC
after Mr. Loeb sought a breakup of the company and threatened a
proxy fight. Dow's stock is up 12% this year.
In March, Dow said it would spin off a significant portion of
its chlorine business to chemicals maker Olin Corp. And last year
it said it would separate more of its commodity-based chemicals
business, looking to focus on higher-end specialty concoctions, in
a move to create more stable earnings. Since 2009, Dow has shed
businesses responsible for $15 billion in annual revenues and Mr.
Liveris has suggested the changes are big enough that the company
could even drop "chemical" from its name.
A deal with DuPont would mark a high point for Mr. Liveris's
11-year tenure at the top the Midland, Mich., company. While Dow
was rocked by the financial crisis and a deal at that time that
nearly sunk the company, his strategy to realign the company's
products has returned the stock to near all-time highs.
Write to David Benoit at david.benoit@wsj.com, Dana Cimilluca at
dana.cimilluca@wsj.com, Dana Mattioli at dana.mattioli@wsj.com and
Jacob Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
December 08, 2015 21:02 ET (02:02 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
DuPont de Nemours (NYSE:DD)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
DuPont de Nemours (NYSE:DD)
Historical Stock Chart
Von Jul 2023 bis Jul 2024