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Dow, DuPont To Merge In $130 Billion Deal; 10% Of DowDuPont's Workforce To Be Fired
It's official: two of America oldest publicly traded companies will combine, with Dow and DuPoint merging as equals in a combined company that will have a $130 billion market cap and will be named DowDuPont. And while shareholders already benefited from the deal with shares of both consitutents rising by 10% in the days preceding the official announcement, the biggest loser are once again the employees: the combined company announced that as part of the $700 million in restructuring efforts, 10% of the combined company's employees will be laid off.
Here are the details:
- DuPont and Dow will each own about 50% of combined firm, excluding preferred shrs
- Sees separation into three public companies; sees 18-24 months post merger
- Edward Breen will be named CEO of combined co.; Andrew Liveris will be named Executive Chairman
- Dow holders to get fixed exchange ratio of 1.00 shr DowDupont
- DuPont shareholders will receive fixed exchange ratio of 1.282 shares in DowDuPont
- Sees run-rate cost synergies of $3b, projected to create $30b of market value; about $1b in growth synergies expected
- Sees deal closing 2H; to have headquarters in Midland, Mi, Wilmington, DE
- DuPont sees 10% job cuts; sees pretax charge $780m, including $650m of employee separation costs
- DuPont sees currency headwinds 25c/shr; sees 5c-10c/shr pressure from higher base tax rate
From the press release:
DuPont and Dow to Combine in Merger of Equals
- Will Create Highly Focused Leading Businesses in Agriculture, Material Science and Specialty Products; Intend to Subsequently Spin Into Three Independent, Publicly Traded Companies
- Highly synergistic transaction expected to result in run-rate cost synergies of approximately $3 billion, which are projected[1] to create approximately $30 billion of market value
- Approximately $1 billion in growth synergies are also expected to be achieved
- Combined market capitalization will be approximately $130 billion at announcement
- Andrew N. Liveris will be named Executive Chairman and Edward D. Breen will be named CEO of combined company; Advisory Committees will be established for each business
- Dow and DuPont shareholders will each own approximately 50 percent of the combined company, on a fully diluted basis, excluding preferred shares
WILMINGTON, Del. and MIDLAND, Mich., Dec. 11, 2015 /PRNewswire/ -- DuPont (NYSE: DD) and The Dow Chemical Company (NYSE: DOW) today announced that their boards of directors unanimously approved a definitive agreement under which the companies will combine in an all-stock merger of equals. The combined company will be named DowDuPont. The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs. This would occur as soon as feasible, which is expected to be 18-24 months following the closing of the merger, subject to regulatory and board approval.
The companies will include a leading global pure-play Agriculture company; a leading global pure-play Material Science company; and a leading technology and innovation-driven Specialty Products company. Each of the businesses will have clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages, and focused investments in innovation to better deliver superior solutions and choices for customers.
"This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders," said Andrew N. Liveris, Dow's chairman and chief executive officer. "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. This transaction is a major accelerator in Dow's ongoing transformation, and through this we are creating significant value and three powerful new companies. This merger of equals significantly enhances the growth profile for both companies, while driving value for all of our shareholders and our customers."
"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. "For DuPont, this is a definitive leap forward on our path to higher growth and higher value. This merger of equals will create significant near-term value through substantial cost synergies and additional upside from growth synergies. Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each business will be a leader in attractive segments where global challenges are driving demand for these businesses' distinctive offerings."
HIGHLY SYNERGISTIC TRANSACTION
Upon closing of the transaction, the combined company would be named DowDuPont and have a combined market capitalization of approximately $130 billion at announcement. Under the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share. Dow and DuPont shareholders will each own approximately 50 percent of the combined company, on a fully diluted basis, excluding preferred shares.
The transaction is expected to deliver approximately $3 billion in cost synergies, with 100 percent of the run-rate cost synergies achieved within the first 24 months following the closing of the transaction. Additional upside of approximately $1 billion is expected from growth synergies.
INTENDED SEPARATION INTO THREE INDEPENDENT, PUBLICLY TRADED COMPANIES
It is the intention of both companies' boards of directors that, following the merger, DowDuPont would pursue a tax-free separation into three independent, publicly traded companies with each targeting an investment grade credit rating. Each would be a strong, focused business with powerful innovation capabilities, enhanced global scale and product portfolios, focused capital allocation, and a distinct competitive position. The three businesses that the boards intend to separate are:
Agriculture Company: Leading global pure-play agriculture company that unites DuPont's and Dow's seed and crop protection businesses. The combined entity will have the most comprehensive and diverse portfolio and a robust pipeline with exceptional growth opportunities in the near-, mid- and long-term. The complementary offerings of the two companies will provide growers across geographies with a broad portfolio of solutions and greater choice. Combined pro forma 2014 revenue for Agriculture is approximately $19 billion.
Material Science Company: A pure-play industrial leader, consisting of DuPont's Performance Materials segment, as well as Dow's Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions, and Consumer Solutions (excluding the Dow Electronic Materials business) operating segments. The combination of complementary capabilities will create a low-cost, innovation-driven leader that can provide customers in high-growth, high-value industry segments in packaging, transportation, and infrastructure solutions, among others with a broad and deep portfolio of cost-effective offerings. Combined pro forma 2014 revenue for Material Science is approximately $51 billion.
Specialty Products Company: A technology driven innovative leader, focused on unique businesses that share similar investment characteristics and specialty market focus. The businesses will include DuPont's Nutrition & Health, Industrial Biosciences, Safety & Protection and Electronics & Communications, as well as the Dow Electronic Materials business. Together, their complementary offerings create a new global leader in Electronics Products, and each business will benefit from more targeted investment in their productive technology development and innovation capabilities. Combined pro forma 2014 revenue for Specialty Products is approximately $13 billion.
Advisory Committees will be established for each of the businesses. Breen will lead the Agriculture and Specialty Products Committees, and Liveris will lead the Material Science Committee. These Committees will oversee the respective businesses, and will work with Liveris and Breen on the intended separation of the businesses into independent, standalone entities.
MANAGEMENT, GOVERNANCE AND CORPORATE HEADQUARTERS
Upon completion of the transaction, Liveris, President, Chairman and CEO of Dow, will become Executive Chairman of the newly formed DowDuPont Board of Directors and Breen, Chair and CEO of DuPont, will become Chief Executive Officer of DowDuPont. In these roles, both Liveris and Breen will report to the Board of Directors. In addition, when named, the chief financial officer will report to Breen.
DowDuPont's board is expected to have 16 directors, consisting of eight current DuPont directors and eight current Dow directors. The full list of directors will be announced prior to or in conjunction with the closing of the merger. The Committees of each company will appoint the leaders of the three new standalone companies prior to a contemplated spin-off.
Following the closing of the transaction, DowDuPont will be dual headquartered in Midland, Michigan and Wilmington, Delaware.
APPROVALS AND TIME TO CLOSE
The merger transaction is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals, and approval by both Dow and DuPont shareholders. The subsequent separation of DowDuPont, which the companies intend to pursue, would be expected to occur 18-24 months following the closing of the merger.
CONFERENCE CALL AND WEBCAST DETAILS
Dow and DuPont will host a joint conference call and webcast today at 8:00 a.m. Eastern Time (U.S.) to discuss the proposed merger. Participants will include Dow's chairman and CEO and DuPont's chairman and CEO. To access the audio webcast please visit the Investor Relations sections of Dow or DuPont's websites. For those unable to listen to the live broadcast, a replay will be available on both websites.
A copy of the investor presentation will be made available on both companies' Investor Relations websites. Additional information regarding the transaction can be found on www.DowDuPontUnlockingValue.com.
ADVISORS
Klein and Company, Lazard, and Morgan Stanley & Co. LLC are serving as Dow's financial advisors for the transaction with Weil, Gotshal & Manges LLP acting as its legal advisor.
Evercore and Goldman, Sachs & Co. are serving as DuPont's financial advisors for the transaction, with Skadden, Arps, Slate, Meagher & Flom LLP acting as its legal advisor.
* * *
And then the less pleasant find print:
Today DuPont announced a 2016 global cost savings and restructuring plan designed to reduce $700 million in costs compared with 2015. The 2016 cost reductions include a range of structural actions across all businesses and staff functions globally to operate more efficiently by further consolidating businesses and aligning staff functions more closely with the businesses. The new plan builds on the company's previous operational redesign initiative.
The plan further simplifies the company's structure into fewer, larger businesses with integrated functions, leading to sustainable cost reductions, faster decision making and closer connections to end markets. The company will begin implementation of these changes immediately.
As a result of these actions, the company expects to record a pre-tax charge to earnings of approximately $780 million, consisting of approximately $650 million of employee separation costs and about $130 million of asset-related charges and contract terminations. Approximately 10 percent of DuPont's global workforce will be impacted.
DuPont also highlighted 2016 macroeconomic expectations. Given global economic conditions in agriculture and emerging markets, the company expects sales growth in 2016 to be challenging. Currency headwinds are expected to be about $0.25 per share, due to the continued strengthening of the U.S. dollar primarily against the Brazilian Real. The company also expects $0.05 to $0.10 per share of pressure from a higher base tax rate, reflecting expectations of the geographic mix of earnings and cost savings that will be recognized primarily in the United States. The company plans to provide full-year 2016 guidance during its fourth-quarter 2015 earnings announcement scheduled for Jan. 27, 2016.
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YES!
It's a RECOVERY!!!!
Yes
We
Can!
...The ten percent fired staff's salaries will be paid instead to the two CEO's.
It's the American Way.
Let’s merge all 30 DOW components and get it over with! ;-)
Looney
DOWPont???
"Let’s merge all 30 DOW components and get it over with!"
That only happens when the PPT is on vacation (tossing out the poor performing components & putting in the hot shots). When FB gets put in the DOW, you'll know the gig is finally up.
With Monsanto, the ag sector would be all wrapped up.
I think the combined DOW/DuPont merged Ag portion of the business would actually be a fair bit bigger than Monsanto but your point is well taken.
With control of glyphosate and much of the GMO action I coudda been truly evil.
Dammit, another missed opportunity.
--Dowpont
Anti Trust? (laugh track deafening!)
Robby, you ignorant slut!
Excellent, this level of legal consolidation within the chemical production and application industry will surely lead to a greater degree of competition among healthy firms, a greater standard of living for communities employed by firms, an additional boost to the firm's economy of scales, enhanced capital allocation and accounting, and not to mention the flex to the firm's stock! This is awesome bro, and, moreover, I am doublly happy to have done so well in Econmics at the University of Texas. FED, FED, AWAY!
/s
When I was reading a quarterly print out from the lemmings at the national branch of business where local branches have to receive services, I was horrified at the language used by the economist doing the research. I do not understand how it is that they cannot correctly identify behavior in the economy that eludes neo-classical semantics. The heavy use of wool blanket statements, the charts and reference to reference the charts, and throughout the whole (8 pages) fucking thing I did not read what I felt could have only been produced by a human.
This is algo talk; the glory hole ambassadors.
50+ years of FED Stocked Academia = There is no longer academic study of economics. It has become the training grounds for propagandists.
Hey Looney,
Let's merge all companies into one and get it over with! I know , we can call it Facebook! :-).
You mean merge them, fire all those people, then, on paper, spin them off in to 30 different companies.....
"My GOD SIR! That's the best idea I've heard all century!" - Janet Yellen, in response to your idea.
10% Of DowDuPont's Workforce To Be Fired
Happy Christmas....and a Merry New Year.
& now, it's BEEF JERKY TIME!
Uht oh.
I used to work for John Deere in a situation where there was a buyout. Umm...you are fired. We don't need you anymore. That is just great isn't it?
I can beat that, I used to work for Enron pipeline division (yes that same can't lose dog turd that Kinder Morgan bought out that is blowing up again now)..The gift that keeps on giving... er finding new suckers in a different wrapper.
Exactly 6 weeks before it blew up they called a mandatory company meeting of ALL employees proposing that we could now buy the companies stock direct with payroll deduction. I somehow contained my overwhelming enthusiasm and did'nt bite.
.
Enron? Yep, you beat me with that. Good thing that you didn't bite. I went all in on DE and lost my ass in 2008. Gold and silver is one thing but I went from $98 a share to $25 on DE. I totally fucked up. I should have never been involved in any of that shit. At least I had cashed out my Roth IRA and paid my student loans off. Tax penalties galore.
This life is a rough ride.
It's cool ...
They'll all get OBAMACARE and they'll be able to take those temp jobs at FEDEX delivering packages ...
(till FEDEX fires them)
Then ...
(bartending)
(huzzah)
Ehm, sorry, what do mega-mergers like that signal again? That everything is awesome?
What can possibly go wrong?
But....according to all the right wingers here...big corporations fuel growth because rich people create jobs and should not have to pay taxes and it trickels down to the poor folks?
Looks to me that corporations are becoming robber barons and the right wingers are their biggest cheerleaders.
Just more evidence right wingers are just as batshit insane as the left they talk so badly about.
Oh the Central Planners and the unforeseen ramifications of their plans.
ZIRP encourages these mergers and with the mergers comes the layoffs that are counter to the employment efforts of the Fed.
Misallocation of resources that encourage these mergers and encourages overproductions of goods...thus creating deflation...
all counter to the efforts of the FED RESERVE.... who live by theories that do not apply....
And what of anti trust laws?
Why Hayek had the answer...
SOIALISTS WELCOME MERGERS....for consolidation of industry usually brings more regulation and finally governmental control.
There have been a ton of announced lay offs and yet the unemployment rates declines. Surely there are many other Dow 30 comapnies ready to jettison employees to keep their stock up through 2016
ZIRP causes deflation, a decline in the velocity of money, and creates unemployment.
That will be the lesson learned from the past decade. That will be the new theory.
But the real answer is that low rates can JOLT an economy, but after while it becomes a detriment....and it has been a long while.
Tax Synergy Merger ?
More voters for Bernie Sanders, no they'll just vote for Marco Rubio, designated political Koch stooge? More middle class putz towing the party line until there is no middle class left.
The new ticker that best emulates this massive pair of mammaries: DD
DD is already taken. By duPont. Thus they are already mammaries.
Eliminating competition ... the American way of increasing profits and screwing the rest of us.
Break up the banks.
Break up all compnaies with market caps over 50 billion, or where one firm has more than 50% of a market.
Bring back anti trust and real competition.
The company you live in has a market cap well into the trillions, has enormous monopoly power that it enforces with paid killers.
Oh, I'm sorry, you meant private companies.
Carry on! ;-)
it is ike the 1930's are being repeatd. hope it is blocked.
(Dec. 11, 2016)
DowDuPont to move all operations to the Far East. All US employees to be laid off. Stock up 25%.
Dual HQ's, dual CEO's and to be recombined into 3 co's. Nobody is that smart. But when you're DuPont and you're killing people off at an insecticide plant that is arguably the most dangerous in the nation, you've probably done all the cost-cutting you can at the plant level, so you gotta go for overhead... see http://www.houstonchronicle.com/news/houston-texas/houston/article/Deadl...
Better Profits thru Layoffs
First they came for the Social Security Trust fund, and I did not speak out— Because I was not a Social Security Recipient.
Then they came for the Trade Unionists, and I did not speak out— Because I was not a Trade Unionist.
Then they came for the Dupont Employees, and I did not speak out— Because I was not a Dupont Employee.
Then they came for me—and there was no one left to speak for me.
3 separate public traded companies
#1: All of Dow's good stuff
#2: All of DuPont's good stuff
#3: Dog to be filled with all of their bad deals and costly pensions. Will quickly slide into bankruptcy, Ala Gm=Delphi and Ford= Visteon
Dow's electronic materials is currently making good profits. With that in the third company you might not have the right idea. Unless of course they see the writing on the wall and know that some profitable products are soon to be unprofitable. You could be right that they are in essence heading for the bunker before it all collapses.
we bask in our deep gratitude its only 10% of workforce layoffs; at least its not just before Christmas; if u r one of the laid off, well fuck u; look on the bright side, think of all the money the investment banks and lawyers will make off this 'merger of equals' (now where have we heard that before?);
i u r laid off just now, its not the time to b spendng frivolously, but why not go ahead and get another 1000 rounds of the FMJ .40? it feels so damn good when they show up on your doorstep it'll b worth it; i'm not even kidding here, sometimes i can't believe we don't have all out civil disruption yet yet
OK, just because 10% is easier to sell than 6,300 full time employees (10% of duPont's workforce), they say 10%.
6,300 employees is no big deal when there are billions on the line for stockholders and 1%ers.
Really, 6,300 people. Who fucking cares? Obviously, not the boards of directors of these two magnificent examples of corporate crookery.
Now, isn't there some Christmas shopping you should be doing or a football game to watch? Nothing to see here. Move along.
Moland Springs; Worst phrase to ever enter our language: "Shareholder Value".
Do you ever get the uneasy feeling that these big corporations, that have been doing this consistently in several markets, are actually planning for a smaller population, and are not just trying to improve profits?
If you recognize it as a fact it doesn't give you an uneasy feeling. Instead, you just deal with the idea there will be increasing resource scarcity, and those resources will all be more costly.
I was alluding to an engineered, man-made situation, which would require smaller companies as well as less resources, as in post WWIII, whereas industry could shrink due to a smaller (much smaller) demand from a much smaller population. The new motto: 'Be Ready For Less'.
The reality of the world is - and BTW always has been - you can only really rely on yourself.
The employees took a job that paid them $XX in wages and $xx in benefits - and I will assume they will all be paid as agreed.
The - I thought my job was going to last forever - well as long as I wanted to keep working - but, I can quit anytime I want - was never reality.
Some of the comments so far are akin to saying "THAT'S NOT FAIR!"
Glad my mom explained to me when I was about 8 that life isn't fair - and then again and again enough times so that I finally understood what she meant.
The next thing people say after- that's not fair! - There should be a law!
I will be able to tell the number of progressive, government please help me idiots on ZH by the number of down votes I get -
Which - since life isn't fair - will be a significant %. ;-O
If there was ever a merger than needs to be blocked, this one is it.
Mergers are just capitalism at its finest. STFU commie whiners.
This is the new normal. We are in a depression and have been for some time. The global economy sucks big time and you will see more and more "mergers and aquisitions" in the months ahead. Every segment of commerce will have consolidation between the top two or three competitors. They will preach about synergies, efficiencies, and improved share value but not talk at all about their dirty little secret. Thousands of people will lose their jobs and ultimately their standard of living and way of life. It's one more rung down to collapse and the fleecing will continue until there is nothing left to be squeezed out of the people. Ain't Facism great!