A new Number One: What the Dow-DuPont-Merger Means for Chemicals

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Advisory committees will be established for each of the businesses. DuPont CEO Edward Breen will lead the agriculture and specialty products committees, with Liveris heading the material science committee. DowDuPont’s board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors.

“This is an extraordinary opportunity to deliver long‐term, sustainable shareholder value through the combination of two highly complementary global leaders and the creation of three strong, focused, industry ‐ leading businesses. 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. The global stock markets showed a little less enthusiasm, as DuPont shares gave slightly.

Three out of One: The Planned Split of the Mega Company

As the DowDuPont merger would be followed by a three-way split, broken down to agriculture, material science, and specialty products, the deal would keep the core of Dow Chemical’s integrated franchise in place, excluding its agricultural chemical business and electronics materials business (inherited from Rohm and Haas). The materials science business would also take on DuPont’s performance materials business (including engineering plastics and elastomers) as well as Dow Corning. The only true peer on this scale that remains is BASF.

This specialty products spinoff would be a $12-billion specialty products maker, including DuPont’s safety and protection, electronics, nutrition, and industrial biosciences businesses, plus the addition of Dow’s electronic chemicals business. The deal continues a dramatic rationalization of DuPont’s franchise. DuPont was the largest chemical maker globally by revenue in 2000. At $12 billion, these remaining DuPont businesses would not rank in the top-30 globally.

Consolidation at Hand: Agro–Chemicals Under Pressure

The combination of Dow and DuPont’s agricultural businesses likely presages further consolidation in the agriculture segment. The cyclical downturn in agriculture has made deals in agriculture all but inevitable—a sentiment confirmed by nearly all senior executives at the big-six agricultural chemical firms. Until this DowDuPont was announced, the top ranks of the big six in seeds and crop protection chemicals have remained unchanged since Novartis and Zeneca combined their agriculture businesses to form Syngenta in 2000, although significant consolidation has occurred in recent years among tier-2 producers, who typically focus on crop-protection chemicals.

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