DowDuPont Merger

B. Rajesh Kumar
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B. Rajesh Kumar: Institute of Management Technology

Chapter 5 in Wealth Creation in the World’s Largest Mergers and Acquisitions, 2019, pp 57-67 from Springer

Abstract: Abstract During 2015, Dow and DuPont approved a definitive agreement under which the companies combined in an all-stock merger to form DowDuPont. Dow shareholders received a fixed exchange ratio of 1.00 share of DowDuPont for each Dow share, and DuPont shareholders received a fixed exchange ratio of 1.282 shares of DowDuPont for each DuPont share. As a result of merger, Dow shareholders owned 52%, and the remaining 48% were owned by DuPont shareholders. The merger got regulatory approval after DuPont agreed to sell chunk of its pesticide business and most of its agricultural R&D to FMC. The combination of highly complementary portfolios of Dow and DuPont was intended to create leadership position for the combined company. The merger eliminated the competition between Dow and DuPont for the development and sale of insecticides and herbicides. The merged company gained monopoly over ethylene derivatives which were used to manufacture food packaging and other products. DowDuPont became the world’s largest chemical company by sales. The new combined company was separated into three independent publicly traded companies through tax-free spin-offs. This merger was one of the biggest mergers of farm suppliers. The cumulative monthly return for DuPont during the 25-month time window (−1 month to +23 month) period after merger announcement was approximately 329%. The cumulative daily returns for Dow Chemicals for 444-day merger period (−10 day to +433 day) were 29.1%. The cumulative monthly return for Dow Chemicals for the 25-month time window (−1 month to +23 month) period after merger announcement was approximately 38%.

Keywords: Merger Announcement; Fixed Exchange Ratio; Cumulative Daily Returns; Cumulative Monthly; Materials Science Society (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/978-3-030-02363-8_5

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