DuPont, Dow announce merger in jargon-laden press release

In a joint statement, the companies called the largest-ever deal in the chemical industry ‘highly synergistic.’

Chemical giants Dow and DuPont are about to come even more powerful.

On Friday, the two companies announced that they’re joining forces, with plans to split into three separate, publicly traded companies within 24 months. The $130 billion merger, which is subject to regulatory approval, would be the largest ever in the chemical industry.

The tax-free separation would create a trio of businesses segmented into agriculture, material science and specialty products.

Once the merger has been completed, Deleware-based DuPont’s chairman and chief executive, Edward D. Breen, would become the CEO of the newly named DowDuPont. Andrew N. Liveris, Michigan-based Dow’s chairman and chief executive, would be appointed the DowDuPont Board of Directors’ executive chairman.

In a joint statement, Liveris called the merger a “game-changer” for the chemicals industry and said it “enhances the growth profile” for both Dow and DuPont while “driving value” for their investors and 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.”

In his own lengthy quote laden with jargon, Breen called the deal a “definitive leap forward”:

“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.”

The executives’ statements were far from the only corporate-speak in the joint press release. Under a subhead titled, “Highly synergistic transaction,” the text includes liberal amounts of jargon explaining investors’ compensation and announcing that the deal will save DowDuPont roughly $3 billion, due to “run-rate cost synergies”:

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 eachDuPont 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.

Friday morning, DuPont issued a separate statement outlining its 2016 restructuring plan. The company plans to lay off roughly 10 percent of its employees:

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.

What do you think of the press releases, PR Daily readers? How does the corporate-speak affect Dow and DuPont’s messages?


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