December 15, 2015 Fortune
DuPont CEO Says Dow Merger Is 'Very, Very Tax
The tax-free treatment of the spin-offs Dow Chemical and DuPont plan to carry
out after they merge their businesses is a prime driver of the deal, potentially
saving tens of billions of dollars, industry experts said.
The $120 billion merger, announced last week, comes less than a month after drug
maker Pfizer said it would use its $160 billion acquisition of Allergan as a way
to cut its taxes. It underscores the growing use of mergers and acquisitions as
a way to slash corporate America’s tax bill.
“The whole structure of this is very, very tax efficient and one of the reasons
we are doing it this way, so very beneficial from that standpoint to the
shareholders,” DuPont CEO Ed Breen told analysts on Friday. “When I looked at
every other strategic option to DuPont, there was nothing that came close to
Unlike the Pfizer-Allergan deal, where the savings are the result of Pfizer
redomiciling to Ireland where Allergan is based in a so-called inversion, the
Dow-DuPont tax savings hinge on their transaction being structured as
a merger of equals, a rare event that requires
companies of the same size and scope willing to negotiate it, according to tax
experts. Both companies are now valued at about $60 billion each.
“It is fairly rare,” said Robert Willens, a corporate tax and accounting
consultant. It’s unusual for two companies of roughly equal size in the same
industry to negotiate such a deal, he said.
Typically, companies that have been through a change of control are
liable to pay capital gains taxes on subsequent spin-offs, under section
355 of the U.S. Internal Revenue Code.
If both companies, however, do not formally
undergo a change of control, the spin-offs can be tax-free.
After their merger, Dow and DuPont plan to
create three publicly-traded businesses, focusing on agriculture, materials and
specialty products. They plan to argue that no change of control will have
occurred by structuring their initial deal as a merger of equals. Bolstering
their view that a change of control has not occurred is that the two companies
have many shareholders in common.
Vanguard, State Street Global Advisors, Capital World Investors and BlackRock
are, in that order, the top holders of both companies’ stock.
The companies haven’t disclosed estimates for tax savings. People familiar with
the deal said the savings will far exceed the $3 billion
in annual cost synergies that the companies expect.
Tax experts say there is some, albeit limited precedent to this. The most famous
case where this deal structure was used was the 2007 merger of drug distributors
AmerisourceBergen Corp and Kindred Healthcare Inc, which the companies used to
then spin off their institutional pharmacy businesses.
William Curry, Dow‘s chief tax officer, played a key role in structuring the tax
aspects of the deal with DuPont, according to the sources. Earlier this year, he
orchestrated the separation of a portion of Dow‘s century-old chlorine business
and sale to Olin Corp in a tax-efficient deal worth $5 billion.
Dow and DuPont declined to comment on the tax aspects of their deal.
Dec 29 2015
DuPont Announces 1,700 Layoffs As It Prepares for Dow Merger
DuPont will cut 1,700 jobs in its home state of Delaware
and thousands more globally as it prepares for its
merger with Dow Chemical.
Dow and DuPont announced earlier this month that they would join to create a
giant chemical producer that will eventually be split into three independent
Dow と DuPont、経営統合を発表
At that time, DuPont announced
million cost savings and restructuring program but did not specify how many
jobs would be impacted or where. DuPont CEO Ed Breen sent a letter to employees
Tuesday informing them that approximately 1,700 Delaware positions would be
eliminated in the beginning of the year.
DuPont, which has been based in Delaware for 213 years, said it would have
preferred to let affected employees know of the news first. But it made the
announcement now, amid the holidays, because it is legally required to inform
the state by the end of the year of the local job cuts. The company has
approximately 54,000 employees worldwide and the restructuring program will
ultimately affect about 10 percent of that workforce.
Delaware Gov. Jack Markell said the announcement of the job cuts is "deeply
"DuPont's number one asset is its people, and the innovations that the company
has produced during its storied history are a testament to the quality of those
people," Markell said in a statement.
The combined company, called DowDuPont, will split into three separate entities
that will focus on material science, agriculture and specialty products.
That specialty products company, which would combine DuPont's nutrition and
health, industrial biosciences, safety and protection and electronics and
communications segments with Dow's electronic materials business, will be based
The combined Dow-DuPont business will have dual headquarters in Delaware and
Michigan, where each company is based, until it separates.
The Dow, DuPont deal, if it goes forward, would be among the largest in an
unprecedented year in mergers and acquisitions. The value of buyouts proposed
and completed this year has reached a staggering $5.03 trillion, up 37 percent
from just last year, according to Dealogic.
It is the first time that takeovers have exceeded the $5 trillion level, fueled
by extremely low interest rates. The Federal Reserve raised interest rates for
the first time in nearly a decade less than two weeks ago.
Dow and DuPont expect their combination will cut annual expenses by $3 billion.
DuPont Announces $700 Million Global Cost
Savings and Restructuring Plan for 2016; Highlights 2016 Macroeconomic
Today DuPont announced a 2016 global cost savings and restructuring plan
designed to reduce $700 million in costs compared with
2015. The 2016 cost reductions include a range of structural actions
across all businesses and staff functions globally to operate more efficiently
by further consolidating businesses and aligning staff functions more closely
with the businesses. The new plan builds on the company’s previous operational
The plan further simplifies the company’s structure into fewer, larger
businesses with integrated functions, leading to sustainable cost reductions,
faster decision making and closer connections to end markets. The company will
begin implementation of these changes immediately.
As a result of these actions, the company expects to record a
pre-tax charge to earnings of
approximately $780 million, consisting of approximately
$650 million of employee separation costs and about
$130 million of asset-related charges and contract terminations.
Approximately 10 percent of DuPont’s global workforce
will be impacted.
DuPont also highlighted 2016 macroeconomic expectations. Given global economic
conditions in agriculture and emerging markets, the company expects sales growth
in 2016 to be challenging. Currency headwinds are expected to be about $0.25 per
share, due to the continued strengthening of the U.S. dollar primarily against
the Brazilian Real. The company also expects $0.05 to $0.10 per share of
pressure from a higher base tax rate, reflecting expectations of the geographic
mix of earnings and cost savings that will be recognized primarily in the United
States. The company plans to provide full-year 2016 guidance during its
fourth-quarter 2015 earnings announcement scheduled for Jan. 27, 2016.
DuPont has been bringing world-class science and engineering to the global
marketplace in the form of innovative products, materials, and services since
1802. The company believes that by collaborating with customers, governments,
NGOs, and thought leaders, we can help find solutions to such global challenges
as providing enough healthy food for people everywhere, decreasing dependence on
fossil fuels, and protecting life and the environment. For additional
information about DuPont and its commitment to inclusive innovation, please
11 August 2016 European Commission
Mergers: Commission opens in-depth
investigation into proposed merger between Dow and DuPont
The Commission has opened an in-depth probe to assess whether the proposed
merger of Dow and DuPont is in line with the EU Merger Regulation. The
Commission will investigate further whether the deal may reduce competition in
areas such as crop protection, seeds and certain petrochemicals.
Commissioner Margrethe Vestager, in charge of competition policy, said: “The
livelihood of farmers depends on access to seeds and crop protection at
competitive prices. We need to make sure that the proposed merger does not lead
to higher prices or less innovation for these products.”
The proposed merger between Dow and DuPont, both of the US, would create the
world's largest integrated crop protection and seeds company. It would combine
two competitors with leading herbicides and insecticides portfolios and with a
strong track record of bringing innovative crop protection and seeds products to
the market. It would also create a leading integrated producer of certain
petrochemical products that are widely used in packaging and adhesive
applications. The transaction would take place in industries that are already
The Commission’s preliminary concerns
The Commission's initial market investigation identified preliminary concerns in
the following markets:
Dow and DuPont both have a strong portfolio of herbicides for a number of crops
(e.g. cereals, beets and oilseed rape), as well as of insecticides, particularly
those used against chewing insects. The Commission has preliminary concerns that
the proposed merger could reduce competition on these markets and that the
reduction in the intensity of competition may have an impact on price, quality,
choice and innovation.
The Commission's investigation will also be looking into Dow and DuPont's
activities in nematicides, which are products used to protect against nematode
worms, as well as into the companies’ product pipelines in fungicides.
Finally, the Commission also has preliminary concerns that the merger may lead
to a reduction of innovation in crop protection as a whole. Dow and DuPont are
important innovators in the crop protection industry, which is characterised by
a limited number of global companies with significant R&D capabilities. The
transaction would lead to the elimination of one of the few companies able to
develop and launch new active ingredients.
Dow and DuPont both develop so-called “gene editing” technologies that could be
used to materially accelerate the breeding of new seed varieties. The Commission
has preliminary concerns that, after the proposed transaction, the companies may
have fewer incentives to license these technologies to competitors or may make
the development of competing technologies more difficult.
The merged entity would hold both a broad portfolio of crop protection products
and one of the leading global market positions in seeds, making it the largest
integrated company in the industry. The Commission is investigating whether
competitors' access to distributors of crop protection products and seeds could
become more difficult if Dow and DuPont were to tie their sales of crop
protection products and seeds.
Petrochemical products - polyolefins and monomers
Dow and DuPont are strong suppliers of specialty polyolefins, which are
thermoplastics derived from petrochemical products and widely used in packaging
and adhesive applications. The Commission is investigating the effect of
eliminating one competitor and creating new vertical links in these concentrated
The transaction was notified to the Commission on 22 June 2016. The Commission
now has 90 working days, until 20 December 2016, to take a decision. The opening
of an in-depth inquiry does not prejudge the final result of the investigation.
On 20 July 2016, Dow and DuPont submitted commitments to address some of the
Commission’s preliminary concerns. However, the Commission considered these
commitments insufficient to clearly dismiss its serious doubts as to the
transaction's compatibility with the EU Merger Regulation. The Commission
therefore did not test them with market participants.
Given the worldwide scope of Dow and DuPont's activities, the Commission is
cooperating closely with other competition authorities, notably with the
Department of Justice in the US and the antitrust authorities of Brazil and
Companies and products
Dow is a diversified chemicals company headquartered in the United States. It is
the ultimate parent company of the Dow group, which is active in plastics and
chemicals, agricultural sciences, and hydrocarbon and energy products and
DuPont is also headquartered in the United States. It is the ultimate parent
company of the DuPont group, which researches, develops, produces, distributes,
and sells a variety of chemical products, plastics, agro-chemicals, paints,
seeds, and other materials.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving
companies with a turnover above certain thresholds (see Article 1 of the Merger
Regulation) and to prevent concentrations that would significantly impede
effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are
cleared after a routine review. From the moment a transaction is notified, the
Commission generally has 25 working days to decide whether to grant approval
(Phase I) or to start an in-depth investigation (Phase II).
Fri Sep 9, 2016
EU regulators halt Dow, DuPont merger review
to gather data
EU antitrust regulators have halted their scrutiny of Dow Chemical Co and
DuPont's proposed merger while the companies provide more information regarding
their $130 billion deal.
The European Commission opened a full investigation into the case in August,
concerned that the deal to create the world's largest integrated crop protection
and seeds company may reduce competition in these sectors as well as certain
"The Commission has stopped the clock in its in-depth investigation into the
proposed merger between Dow and Dupont," a spokesman said.
"This procedure in merger investigations is activated if the parties do not
provide an important piece of information that the Commission has requested from
The EU antitrust enforcer will set a new deadline for its investigation once it
has received the required data. DuPont and Dow Chemicals, which aim to close the
deal in early 2017, had previously offered concessions which regulators said
The agrichemicals industry has seen a wave of consolidation in recent months.
ChemChina may seek EU approval next week for its $43
billion takeover of Swiss pesticides and seeds group Syngenta, according
to a person familiar with the matter.
German pharmaceutical and crop chemicals manufacturer
Bayer AG is also pursuing U.S. peer and world No. 1 seeds company Monsanto Co.
|27 March 2017
Mergers: Commission clears merger
between Dow and DuPont, subject to conditions
The European Commission has approved under
the EU Merger Regulation the proposed merger between US-based chemical
companies Dow and DuPont. The approval is conditional
in particular on the divestiture of major parts of DuPont's global pesticide
business, including its global R&D organisation.
Commissioner Margrethe Vestager,
in charge of competition policy, said: "Pesticides are products that
matter – to farmers, consumers and the environment. We
need effective competition in this sector so companies are pushed to
develop products that are ever safer for people and better for the
environment. Our decision today ensures that the merger between Dow and
DuPont does not reduce price competition for existing pesticides or
innovation for safer and better products in the future."
Today's decision follows an in-depth
review of the merger. The Commission had concerns that the merger as
notified would have reduced competition on price
and choice in a number of markets for existing
pesticides. Furthermore, the merger would have
reduced innovation. Innovation, both
to improve existing products and to develop new active ingredients, is a key
element of competition between companies in the pest control industry, where
only five players are globally active throughout the entire research &
development (R&D) process.
The commitments submitted by Dow and
DuPont address these concerns in full. The parties will remove the overlap
in markets, where concerns were raised, by divesting
the relevant DuPont pesticide businesses. They will also
divest almost the entirety of DuPont's global R&D
organisation. The Commission concluded that the divestment package
enables a buyer to sustainably replace DuPont's competitive effect in these
markets and continue to innovate, for the benefit of European farmers and
As regards certain
petrochemical products, where both companies are important
players, the parties will divest relevant assets in
Dow's petrochemical business to preserve effective competition.
DuPontの Edward D.
コポリマーとアイオノマー事業をSK Global Chemical に売却する契約を締結した。
This transaction is one out of a number
of proposed mergers in the agrochemical sector. The Commission examines each
case on its own merits. In line with its case practice, the Commission
assesses parallel transactions according to the so-called "priority rule" -
first come, first served. The assessment of the merger between Dow and
DuPont has been based on the currently prevailing market situation.
The Commission had three main categories
of competition concerns.
a) Significantly reducing competition
in a number of markets for existing pesticides
Pesticides are products used in
agriculture to control pests that can harm crops. They can be categorised
into herbicides (targeting weeds),
insecticides (targeting insects) and fungicides
The merged entity would have held very
high combined market shares for a number of pesticides, with few other
competitors remaining. The Commission found that the merger would have
significantly impeded effective competition and resulted in reduced choice
and higher prices in the following markets:
- As regards herbicides,
the transaction would have significantly reduced competition for certain
types of selective herbicides for cereals, oilseed rape, sunflower, rice
and pasture in a number of Member States.
- As regards insecticides,
the transaction would have significantly reduced competition for
products controlling for chewing insect and sucking insect in fruits and
vegetables and some other crops in a number of Member States in
particular in the South of Europe.
- As regards fungicides,
where the parties overlap to a more limited degree, the transaction
would have reduced competition for rice blast fungicides in some Member
b) Significantly reducing
innovation competition for pesticides
Innovation in pesticides is of particular
importance. The Commission's in-depth investigation confirmed that the
ability and incentive to innovate is important to capture sales from
competitors and to defend existing sales. Farmers value new products that
are less toxic or more efficient against pests, which may become resistant
to existing active ingredients over time.
The transaction would have had a
significant impact on innovation competition by:
- Removing the parties' incentives
to continue to pursue ongoing parallel innovation efforts - The
Commission's investigation of Dow and DuPont's innovation pipelines
demonstrated that the two are competing head-to-head in a number of
important herbicide, insecticide and fungicide innovation areas. After
the merger, they would have an incentive to discontinue some of these
costly development efforts.
- Removing the parties' incentives
to develop and bring to market new pesticides – The Commission
found specific evidence that the merged entity would have lower
incentives and a lower ability to innovate than Dow and DuPont
separately. In its investigation it also found specific evidence that
the merged entity would have cut back on the amount they spent on
developing innovative products. Only five companies (BASF, Bayer,
Syngenta and the merging parties) are globally active throughout the
entire R&D process, from discovery of new active ingredients (molecules
producing the desired biological effect), their development, testing and
regulatory registration, to the manufacture and sale of final formulated
products through national distribution channels. Other competitors have
no or more limited R&D capabilities (e.g. as regards geographic focus or
product range). After the merger, only three global integrated players
would remain to compete with the merged company, in an industry with
very high barriers to entry. The number of players active in specific
innovation areas would be even lower than at the overall industry level.
c) Significantly reducing
competition for certain petrochemical products.
Dow and DuPont's activities also overlap
in petrochemical products. Specifically, the Commission had concerns due to
the high combined market shares of the two companies in the acid
co-polymer market, where the number of competitors would be
reduced from four to three. The Commission also had concerns due to the
strengthening of DuPont's dominant position in the ionomer
market. These are products widely used in packaging and adhesive
The Commission initially also had
concerns relating to nematicides
used to protect against nematode worms) and
seeds. However, the in-depth investigation
did not confirm these.
The parties offered a set of commitments,
which address the Commission's competition concerns in full.
a & b) Preserving price and
innovation competition in pesticide markets
The parties will divesta significant part
of DuPont's existing pesticide business, including its R&D organisation, in
- Globally, DuPont's herbicides
for cereals, oilseed rape, sunflower, rice and pasture (thifensulfuron,
tribenuron, metsulfuron, chlorsulfuron, triflusulfuron, lenacil,
flupyrsulfuron, ethametsulfuron and azimsulfuron) and
insecticides for chewing insect and sucking insect control
for fruits and vegetables etc. (indoxacarb, cyazypyr and rynaxypyr).
They will also divest all tangible and intangible assets underpinning
the divested products (including the facilities where the products are
manufactured) and relevant personnel.
- An exclusive license to DuPont's
product for rice cultivation in the European Economic Area to address
the more limited concerns relating to fungicides.
global R&D organisation, with the exception of a few
limited assets that support the part of DuPont's pesticide business,
which is not being divested.
The Commission concluded that the
divestment package will enable a buyer to replace the competitive constraint
exerted by DuPont. Competition on price and choice in existing markets is
preserved because all of DuPont's products in problematic markets are
divested. The sale of the underpinning R&D organisation and pipeline ensures
the viability and competitiveness of the divested business on a lasting
basis and will enable the buyer to become a global integrated R&D
c) Preserving competition for
certain petrochemical products
Dow will divest its two
manufacturing facilities for acid co-polymers
in Spain and in the US, as well as the contract with a third
party through which it sources ionomers
that it sells to its customers.
The Commission has been in close contact
with a number of other competition authorities, which are also reviewing the
transaction. In particular, the Commission has had regular exchanges with
the US Department of Justice and the competition authorities of Australia,
Brazil, Canada, Chile, China and South Africa.
Companies and products
Dow is headquartered in the United
States. It is the ultimate parent company of the Dow group, which is active
in plastics and chemicals, agro-chemicals, and hydrocarbon and energy
products and services.
DuPont is also headquartered in the
United States. It is the ultimate parent company of the DuPont group, which
is active in a variety of, plastics and chemicals, agro-chemicals, paints,
seeds, and other materials.
The Commission has the duty to assess
mergers and acquisitions involving companies with a turnover above certain
thresholds (see Article 1 of the
Merger Regulation) and to prevent concentrations that would
significantly impede effective competition in the EEA or any substantial
part of it.
In addition to this investigation, there
are currently three other in-depth merger investigations:
- the proposed acquisition by
HeidelbergCement and Schwenk of Cemex Croatia
- the proposed merger of
Deutsche Börse and London Stock Exchange Group and
- the proposed acquisition of
Syngenta by ChemChina.