After Nabbing U.S. Antitrust Clearance, Dow Chemical (NYSE:DOW), DuPont (NYSE:DD) Eye August Completion for Merger


Dow Chemical Co. (NYSE:DOW) and DuPont (NYSE:DD) have reached a proposed settlement with the U.S. Department of Justice that would allow the chemical majors to proceed with their “merger of equals.”

The companies will be required to sell multiple crop protection and two petrochemical products for their deal to advance, a move which the department says would resolve its competition concerns.

Under the settlement, DuPont must off-load its Finesse herbicide and Rynaxypyr insecticide products to a U.S. government-approved buyer. These products have total combined annual U.S. sales of more than $100 million, and their sale would preserve competition in U.S. markets for chewing pest insecticides and winter wheat herbicides.

Dow, meanwhile, will be required to sell its U.S. acid copolymers and ionomers business.

The settlement does not entail any additional divestitures, and no further approvals are required in the U.S. for the merger’s completion, the companies noted.

“With today’s DOJ clearance, we have taken a significant step forward in bringing together these two iconic enterprises, and in the subsequent intended separation into three leading, independent innovation-based science companies that will generate significant benefits for all stakeholders,” Dow Chairman and CEO Andrew Liveris said in a June 15th, release.

The settlement remains subject to court approval, and the merger is still expected to close in August, with the planned spin-offs to occur within 18 months of completion.

Merger of Equals

Dow and DuPont initially announced the transaction in December 2015.

The new entity will be named DowDupont and will have a combined market capitalization of $130 billion.

Cost and growth synergies associated with the merger are still pegged at about $3 billion and $1 billion, respectively.

Dow and DuPont to date have secured clearance in several jurisdictions, including in the U.S., Europe, Brazil and China.

Dow also recently announced the members of the new entity’s board, which will consist of eight current directors each from Dow and DuPont.

First Quarter Results

Both companies reported strong results in the first quarter.

Dow reported earnings per share of 72 cents in the quarter, as compared to 15 cents booked same period last year, as sales rose by 23% year over year to $13.2 billion.

The company’s operating EBITDA also increased by a record 20% to $2.7 billion, mainly due to broad-based, consumer-driven demand.

DuPont, meanwhile, said its first-quarter EPS increased by 9% to $1.52 from $1.39 same period last year.

Sales also rose 5% to $7.7 billion, driven by growth in most of the company’s segments, including agriculture, performance materials and electronics and communications.

Dow’s shares closed at $64.10, down 0.67%, while DuPont’s stock also slid 0.78% to end the day at $82.17.