Advanced talks between DuPont, Wilmington, Del., and Dow Chemical, Midland, Mich., are ongoing in what could be another blockbuster merger. Two of the biggest and oldest companies in the U.S. chemical industry, Dow and DuPont could create one of the largest transactions in a year full of huge deals, sources knowledgeable of the matter say.
The move would create a chemicals giant with a $130-billion market value, strengthen their position through weak demand for farm chemicals, but attracting regulatory scrutiny in major markets including China.
Under the terms being discussed, the merger could be followed by a split into three companies focused on agriculture, specialty chemicals and materials, said sources who cautioned that the plans were not final.
Dow and DuPont are grappling with lower demand for farm chemicals, even as their plastics units have posted higher margins from low natural gas prices. Just last week, Dow made a deal to sell part of its global herbicide business. The farm chemicals slump has lead to talk of consolidation in the agriculture industry.
Antitrust regulators will evaluate each companies' markets. Dow has produced a slew of plastics and agricultural chemicals, while DuPont claims such innovations as Kevlar, Tyvek and Teflon. Each company has come under attack from activist investors unhappy with its financial performance. Neither firm would comment on the possible merger.
If the two companies strike a deal, it would be one of several colossal mergers in a year for deal makers. More than $4 trillion worth of deals have been struck since the beginning of this year, surpassing 2007 as the busiest year for acquisitions.