US chemicals giants Dow Chemical and DuPont merge

America’s chemicals giants Dow Chemical and DuPont plan a merger that would see the combined entity, DowDuPont, have a market value of around $130bn.

America's chemicals giants Dow Chemical and DuPont plan an all-share merger that would see shareholders in each firm receive 50% of the combined entity, DowDuPont, which would have a market value of around $130bn. Both are well-established blue chips: DuPont began life in 1802 as a gunpowder manufacturer for the revolutionary war; Dow was founded in 1897. After their merger, the new group plans to split into three new separately listed units: plastics, agribusiness and speciality chemicals.

What the commentators said

Breaking up lumbering giants certainly often helps release value, "but in this case it doesn't look as if there's a big conglomerate discount that would evaporate", reckoned BreakingViews.com's Robert Cyran. The sum of the parts of the two companies, based on the valuations investors are paying for their peers, "is not far from where the stocks trade". Still, there would be impressive cost savings from the deal.

These are estimated at around $3bn by Deutsche Bank, said The Wall Street Journal's Charley Grant: "a chunky" 23% of the groups' combined selling, general and administrative expenses over the past year. And the overall logic of the tripartite split is sound, as these businesses vary in terms of their long-term prospects, profitability and sensitivity to the business cycle.But merging, persuading regulatorsthat the deal won't be anti-competitive, and then splitting, will take severalyears. "Get comfortable."

Recommended

Share tips of the week – 7 October
Share tips

Share tips of the week – 7 October

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
6 Oct 2022
5 of the world's best stocks
Share tips

5 of the world's best stocks

Concentrating on a few highly profitable companies that excel in their fields can reduce the overall risk in your portfolio, says Rupert Hargreaves. H…
6 Oct 2022
The Burberry share price looks like a good bet
Trading

The Burberry share price looks like a good bet

The Burberry share price could be on the verge of a major upswing as the firm’s profits return to growth.
5 Oct 2022
What’s happened to Credit Suisse stock?
Bank stocks

What’s happened to Credit Suisse stock?

Credit Suisse stock has slumped on rumours that the bank is in trouble. Is there any truth in this speculation?
5 Oct 2022

Most Popular

Should you take a 25% tax-free pension lump sum in instalments?
Pensions

Should you take a 25% tax-free pension lump sum in instalments?

Taking out a 25% tax-free lump sum sounds appealing but it might not be the best way to manage your pension
30 Sep 2022
Markets may have bounced, but this is not the end of the bear market
Stockmarkets

Markets may have bounced, but this is not the end of the bear market

Stocks are back on the rise, commodities and precious metals prices are up – even the pound has rebounded. But none of this is typical of bull markets…
5 Oct 2022
October’s Premium Bonds: how to check if you are a winner
Savings

October’s Premium Bonds: how to check if you are a winner

NS&I has added almost 110,000 more prizes to October’s Premium Bond draw – are you a winner?
4 Oct 2022