Dow-DuPont Merger – The Road Ahead

2016-07-22
Published : Jul-2016

Stakeholders for agriculture and chemicals companies DuPont and Dow Chemical have ratified their merger, in addition to an ensuing strategy that will disintegrate the companies into three parts.The merged company, hence named as DowDuPont, will comprise of products spanning from corn seeds to Kevlar fiber to foam chemicals which are used in sneaker soles.

Together Dow and DuPont were pressed by investors to disintegrate or discover other ways to renew their businesses. They agreed to tie-up in December in an all-stock pact prized at almost $62 billion. The unification is expected to be official by the end of 2016. The supervisory body will still have to approve it. Collectively, Dow and DuPont will be the second-largest chemicals company in the world. In the coming two years, they plan to split into three distinct publicly dealt companies fixated on agriculture, material science and specialty products.

As formatted now, the agreement keeps the core of Dow Chemical’s incorporated franchise in place, exclusive of its agricultural chemical, and electronics materials business. The materials science business would also take on DuPont’s performance materials business as well as Dow Corning. The single true peer on this measure that prevails is BASF.

The specialty products offshoot is likely be a $12-billion specialty products producer, together with DuPont’s electronics, safety and protection, nutrition and industrial biosciences trades, and over the addition of Dow’s electronic chemicals business. The deal endures a vivid validation of DuPont’s franchise. DuPont was the largest chemical maker globally by revenue in 2000. At $12 billion, these outstanding DuPont industries are not likely to rank in the top-30 globally.

The unification of Dow’s and DuPont’s agricultural companies prophesize further alliance in the agriculture segment. The recurring slump in agriculture has made deals in agriculture all but unavoidable, an assessment confirmed by almost all senior executives at the big-six agricultural chemical firms. This deal continues the change, accelerated in the past few years by the anxiety of activist investors, toward modest and more motivated portfolios. The rearrangement of Dow’s and DuPont’s non-agricultural tasks would carry on the split between specialty chemical and advanced material niches.

In addition to this, the deliberate procurement of Dow Corning, a major silicon producer, will considerably strengthen the merged companies’ electronic materials and consumer care portfolios. Similarly, DuPont’s portfolio matches Dow’s regarding food and nutrition and personal care product constituents.

While Dow upholds the challenging amalgamation with stretched competences to bring a full portfolio of advanced materials, gradually Basics will probably be directed by state-owned enterprises, incorporated oil companies, emerging players in Asia and the Middle East, and existing players in the US and Europe. The US and Europe players would consist of a DowDuPont combination with a long-drawn-out advanced material portfolio Ineos, LyondellBasell Industries, and Westlake Chemical, aside the existence of other MNC producers such as Shell, ChevronPhillips Chemical, or ExxonMobil.

Red more on Chemicals on:

http://www.sandlerresearch.org/market-research/chemicals

Read more on Agribusiness on:

http://www.sandlerresearch.org/market-research/agribusiness

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