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DuPont and Dow Chemical Confirm Merger as ChemChina-Syngenta Deal Back on Table

December 11, 2015

*updated with quote from Armand Lavoie, managing director at investment banking firm Kirchner Group.

The rumor mill can finally take a break this week after DuPont and Dow Chemical officially announced their plans to merge in an all-stock transaction.

The “merger of equals” will see DuPont shareholders a little better off with 1.282 shares in the newly created DowDuPont for each DuPont share they own, while Dow shareholders will receive one share in the new company for every one they own in Dow.

The companies, which are two of America’s oldest with over 300 combined years in business, also revealed plans to separate the newly-combined entity into three businesses: an agriculture company; a  material sciences company; and a specialty products company.

The agriculture business will unite DuPont’s and Dow’s seed and crop protection businesses, and the combined revenues in 2014 were around $19 billion, according to a statement.

“Each of these businesses will be able to allocate capital more effectively, apply its powerful innovation more productively, and extend its value-added products and solutions to more customers worldwide,” said Edward D. Breen, chairman and chief executive officer of DuPont in a statement. Breen will lead the agriculture business.

But there will be little rest for the rumor mill with talk that state-owned China National Chemical Corp (ChemChina) has renewed its offer for the world’s largest pesticide maker Syngenta. And potential for more mergers and acquisitions in the sector more widely.

“The Dow/DuPont merger will be a transformative transaction in the ag industry and may well spur on additional mergers and acquisitions,” said Armand Lavoie, managing director of investment banking firm Kirchner Group. “There has been significant discussion about various potential mergers in 2015 with Syngenta and Monsanto earlier in the year and Syngenta and ChemChina more recently. We at the Kirchner Group expect 2016 will be a very active year from an M&A perspective.”

While Syngenta would not comment on “market rumors” and ChemChina did not respond to requests for comment when AgFunderNews went to press, sources close to Syngenta said the deal was ongoing.

Bloomberg reported that ChemChina was considering a new bid of Sfr44 billion  ($44.6 billion); Syngenta rejected a $42 billion offer from the Chinese state-owned enterprise last month.

It’s unclear what form that deal might take, but there have been obvious comparisons with Monsanto’s $46.6 billion bid that was rejected by Syngenta over the summer. The jury is still out as to whether Monsanto will return with an improved bid in light of the recent activity.

Commentators argue that falling commodity prices and a strong US dollar have put pressure on the revenues of the Big 6 agribusinesses, promoting all this merger talk.

“Over the last decade our entire industry has experienced tectonic shifts as an evolving world presented complex challenges and opportunities – requiring each company to exercise foresight, agility and focus on execution,” said Andrew Liveris, Dow’s chairman and chief executive officer in a statement.

Under the merger plan, Liveris will become executive chairman of DowDuPont and Breen will be chief executive of the new company. They will both report to the board of directors, which will be made up of eight DuPont board members and eight Dow board members.

For Dow and DuPont, it’s now a waiting game to see how the regulators view their planned merger. If the deal goes ahead, DowDuPont will have a combined market cap of $130 billion and will completely reshape the agriculture and chemical industries.

The transaction is expected to deliver approximately $3 billion in cost synergies and should close in the second half of 2016, according to a statement. The planned break-up of the companies will likely occur between 18 and 24 months after the close, it added.

Stay tuned for more coverage on the recent M&A activity in agribusiness on AgFunderNews next week.

Have news or tips? Email [email protected]

Image: Aerial view of DuPont’s Orlon plant in Camden, South Carolina, c. 1930-1945, Boston Public Library.

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