DD DuPont de Nemours Inc

Dow Chemical Co. and DuPont Co. announced Friday that they have agreed to merge, fusing two of the U.S.'s oldest companies into a chemical giant currently worth about $130 billion.

Under the terms of the deal, shareholders of Dow Chemical will get 1 share in the new company called DowDuPont for each Dow share, while DuPont shareholders will get 1.282 shares for each DuPont share.

Dow's Chief Executive Andrew Liveris will be executive chairman of the new company, with DuPont Chief Executive Edward Breen keeping the CEO title.

The companies expect the merger, which must be approved by regulators and both companies' shareholders, to be completed by the second half of 2016.

The deal will be followed by a three-way breakup of the combined company, a common approach to mergers and acquisitions of late. The three resulting companies, which would be publicly-traded, would be focused on agriculture, material sciences and specialty products.

Dow's shares rose 1.6% in premarket trading, while DuPont shares fell 4%.

Still, there is no guarantee antitrust regulators would bless the union or that a breakup plan would address any such concerns. The merger would combine two top suppliers of industrial and agricultural chemicals and crop seeds, but it comes as sinking commodity prices and a strengthening U.S. dollar have hurt revenue across the companies' business lines.

Should the deal 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, eclipsing 2007 as the top year on record for deals, according to Dealogic.

Both Dow and DuPont have been restructuring their businesses as they've come under pressure from shareholders to slim themselves and focus on faster-growing business lines—sometimes by shedding products that made them famous.

DuPont has exited performance paints and coatings, including the business that invented Teflon nonstick 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 deal comes shortly after DuPont named Mr. Breen, a turnaround expert, as the company's chief executive after a stint as interim CEO. 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.

Soon after Mr. Breen stepped in to run DuPont in October, Mr. Liveris called him to propose a deal. For more than a decade, Mr. Liveris had sought to merge with DuPont, and he pitched a deal as a way to find synergies before breaking up the businesses into more focused operations, the people said.

For its part, Dow also has 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.

Talks of consolidation in the agricultural-sciences industry have heated up recently, with companies scrambling 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 agriculture deal with Dow. Monsanto Co. earlier this year abandoned a $46 billion bid for Syngenta amid resistance from the Swiss company.

Separately, Dow Chemical said it had restructured the ownership of Dow Corning Corp. Under the pact, Dow will become the 100% owner of Dow Corning, currently a joint venture between Dow and Corning.

Dana Cimilluca and Dana Mattioli contributed to this article.

Write to David Benoit at david.benoit@wsj.com, Jacob Bunge at jacob.bunge@wsj.com and Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

December 11, 2015 07:25 ET (12:25 GMT)

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