Dow, DuPont Approve Merger; Cuts Ahead

Shareholders of the DuPont Co., the multinational industrial giant that traces its roots to a Delaware gunpowder mill founded by French immigrants in 1802, voted Wednesday to combine with Michigan-based Dow Chemical Company, a larger firm whose shareholders also approved the deal.
Over the next two years, DowDuPont plans to cut $3 billion in costs. Earlier this year, 1,700 jobs in DuPont’s Delaware operations were eliminated.
The company will also execute a scheme led by DuPont boss Edward Breen and Dow chief Andrew Liveris to split into three successor firms. The trio, as planned, will be a materials company based at Dow headquarters in Midland, Mich.; a pesticide-and-seed maker based in Wilmington, Del., but run largely from offices and labs in the Midwest; and a grab bag of DuPont’s remaining businesses, at least some of which analysts expect will attract takeover offers from larger companies or investors.
The companies “are still awaiting key regulatory approvals” and could even draw a last-minute counterbid, said Carol Levenson, an analyst at Gimme Credit. The planned three-way split “makes little sense” and raises “numerous questions” about who will pay off the companies’ billions in borrowings, she said.
The merger has also raised questions from farm-state senators and corporate customers who worry about reduced price competition, and plaintiff lawyers trying to sue DuPont and Dow for environmental and product claims.
While disruptive to DuPont employees, and maybe to customers, the cuts and rebranding could be lucrative for DuPont’s and Dow’s shareholders, who have held on through decades of failed investor targets and share underperformance.