Source:http://www.foxbusiness.com/investing/2015/12/25/dow-dupont-do-what-outlook-for-post-merger-companies/
When Dow Chemical and DuPont announced their merger on Dec. 11, they made it clear that the liaison would be short-lived: They intend to break the combined entity into three within a couple of years of the transaction closing. The resulting companies will be active in materials, specialty chemicals, and agrochemicals.
Some 88%of the material company’s projected $51 billion revenue will come from Dow’s businesses in monomers, resins, and bulk plastics such as polyethylene and polyurethane. DuPont will contribute its comparatively specialized Teflon and nylon assets. Dow has invested heavily in feedstock production, and its facilities are among the largest and most efficient in the world. Plugging DuPont’s business into Dow’s supply chain will contribute most of the $1.5 billion cost.
savings the companies expect to achieve from these operations. The combined business will be smaller than BASF, but a strong global No. 2 in the industry.
DuPont will contribute 85%of the specialty-chemicals company’s projected $13 billion revenue. This company’s products will range from Tyvek and Kevlar to enzymes and semiconductor photoresists. Electronics and communications, nutrition and health, and safety and protection will each contribute $4 billion revenue; industrial biosciences will contribute $1 billion. Former Dow businesses will comprise half the electronics and communications segment, and little else.
However, the day that the merger was unveiled, Dow announced separately that it would purchase fromCorningthe 50% of Dow Corning that it does not already own. About two-thirds of Dow Corning’s $6 billion revenue comes from a wide range of silicone products and a third from polycrystalline silicon, used in solar cells and other electronics applications. Although Dow has not indicated where it might go, it obviously belongs with the specialty company.
Agrochemicals are probably the main motivation for the merger, and the new $19 billion revenue company will be the world’s largest, although its seeds revenue will trail Monsanto’s, and its pesticides business will be No. 3 behind Syngenta and Bayer. Its main strengths will be in corn, cotton and soy. Dow will contribute $5 billion and DuPont $3.5 billion of insecticide revenue; they will contribute $2 billion and $7.5 billion seed revenue, respectively. There is limited product overlap. Agrochemicals and seeds absorb the greatest portion of DuPont’s R&D budget, and the same is probably true, or nearly so, for Dow: Eliminating duplicative research efforts will account for much of the $1.3 billion cost synergies that the agrochemical businesses are expected to achieve.
