The Dow DuPont announced in 2017 the successful completion of an equivalent merger of two large corporations, The Dow Chemical Company (DOW) and E.I. du Pont de Nemours & Company (DuPont). The combined entity is a holding company called DowDuPont, split into three large publicly traded companies operating in the agricultural, high-tech materials, and specialty product segments. It is important to analyze the process of the merger and strategies of both companies as the new corporation became a leading actor in the global chemical products market.
In 2015, the largest and the oldest U.S. companies, Dow Chemical and DuPont, announced plans to merge. The project was that the company, called DowDuPont, would have a market capitalization of about $ 130 billion (Reuters, 2017). At the announcement stage, Dow Chemical and DuPont expected the deal to close in the second half of 2016 (Bunge, Benoit, and Dulaney, 2015). They estimated that they would save $ 3 billion due to cost cuts within two years after completing the transaction (Bunge, Benoit, and Dulaney, 2015). According to executive chairman Andrew Liveris, the merger’s purpose is to create three powerhouses within the industry (Reuters, 2017). Negotiating was not complicated as the companies had nearly the same market capitalization.
However, the merger of the corporations took more time than predicted. DowDuPont announced the successful completion of an equal-value merger between Dow and DuPont in 2017. The company should have been divided into three parts, each of which will deal with a more specialized business (Haydon, 2018). Corteva concentrates on chemicals for agriculture; the second – Dow Inc administers materials science and works with raw materials and semi-finished products, including various plastics (Haydon, 2018). The new DuPont sector is specialized products, particularly fine organic synthesis, used for solar cells (Haydon, 2018). The dissolution of DowDuPont was completed in 2019 (Tullo, 2019). All three new companies are public and listed on the stock exchange.
At present, companies are following the right strategies; before the merger, the corporations faced decreasing demand for agrochemicals due to plummeting grain prices. According to Freytag (2019), the strategy can be changed in terms of optimizing the benefit. After dissolution, three companies are focusing on particular market industries. Concerning financial motives for the merger, they apply to the Dow DuPont case. It will allow holding companies to expand their portfolio of offers and gain a comprehensive effect in a competitive market, build up their client base and improve liquidity (Flexographic Technical Association, n.d.). DowDuPont will significantly discharge the world leader Syngenta in the pesticide industry and Monsanto in the seed market, including genetically modified seeds (MacDonald, 2019). Besides, due to the merger, companies reduce operating costs and save on promoting their products.
To sum up, the Dow and DuPont merger became the largest in the chemical sector and one of the world’s largest in 2017. It has significantly changed the balance of power in the chemical and especially in the agricultural markets. When assets are combined, the market is divided into segments. Overall, large companies are shifting from the intense competition; instead, they are dividing the market and business.
Reference List
Bunge, J., Benoit, D. and Dulaney, C. (2015) ‘DuPont, Dow Chemical Agree to Merge, Then Break Up Into Three Companies”, The Wall Street Journal, Web.
Flexographic Technical Association (n.d.) DowDuPont Announces Successful Merger & Results of Comprehensive Portfolio Review’, Web.
Freytag, R. (2019) ‘Strategic negotiations: three essentials for successful partnerships with startups’, Strategy & Leadership, 48(1), pp. 19-25.
Haydon, D. (2018) ‘DowDuPont names three company brands for separation’, ICIS, Web.
MacDonald, J. M. (2019) ‘Mergers in Seeds and Agricultural Chemicals: What Happened?’, USDA, Web.
Reuters (2017) ‘Dow, DuPont complete planned merger to form DowDuPont’, Web.
Tullo, A. H. (2019) ‘DowDuPont completes final split to form DuPont and Corteva’, C&EN, Web.