U.S. chemical heavyweights DuPont (NYSE:DD) and Dow Chemical (NYSE:DOW) agreed to merge in an all-stock deal valuing the combined company at $130bn, with plans to eventually split into three businesses.
The deal combines two of U.S.’s oldest companies amid tumbling commodity prices and a strong dollar. The two companies, which generated a combined $92bn in sales, would be the second-largest chemical company in the world in terms of revenue after BASF of Germany.
Shareholders of Dow Chemical will receive 1 share in the new company, DowDuPont, for each Dow share, while DuPont share owners will obtain 1.282 shares for each DuPont share.
Dow and DuPont shareholders will each own about 50% of DowDuPont.
The transaction will be followed by a three-way break-up of the merged company, a common approach to mergers and acquisitions of late. The three resulting companies would be focused on agriculture, material sciences and specialty products; they all would be publicly traded.
Job cuts are anticipated to result from the merger. Dow employs 53,000, while DuPont had 63,000 employees as of the end of 2014.
DuPont said in a separate statement that it expected to record a charge before taxes of $780mln, consisting of $650mln in employee separation costs. DuPont said 10% of its global work force would be affected.
DuPont shares were down about 4% at $71.60 in pre-market trading on Friday, while Dow shares were down 1.9% at $53.85. The merger comes as falling commodity prices and a strengthening U.S. dollar have hurt revenue across the companies’ business lines.
The new company would have dual headquarters in Wilmington, Delaware, and Midland, Michigan.
Dow was founded in 1897 as a bleach producer in Michigan. DuPont was founded in 1802 in Delaware.