December 15, 2015  Fortune  

DuPont CEO Says Dow Merger Is 'Very, Very Tax Efficient'

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 this.”

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.


A社がB社を買収し、B社の事業をスピンオフする場合、A社はB社の事業をコントロールしていなかったため、Capital Gain Taxの課税対象となる。

今回の場合、DowDuponはDowとDuPontの50/50JVのため、スピンオフするDowの事業とDuPontの事業はDowDupontがControl していたといえる。

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 companies.

2015/12/14   Dow と DuPont、経営統合を発表

At that time, DuPont announced a $700 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 disappointing."

"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 in Delaware.

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 Expectations

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 redesign initiative.

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 visit www.dupont.com.


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 globally concentrated.

The Commission’s preliminary concerns
The Commission's initial market investigation identified preliminary concerns in the following markets:

Crop protection
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 markets.

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 Canada.

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 services.

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 petrochemicals.

"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 them."

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 were insufficient.

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 European Commission    

 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 consumers.

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. Breen CEOはDuPontの社内報で次のように述べた。


詳細は明らかにできないが、強力な競争相手を創出するために、DuPontのCrop Protection部門の一部とそのR&Dを1社に売却する案が含まれている。

Dowは2月2日、グローバルのエチレンアクリル酸(EAA) 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。

2017/2/15     Dow とDuPont、合併承認を求め、事業売却を提案 

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 (targeting diseases).

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:

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:

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 applications.

The Commission initially also had concerns relating to nematicides 殺線虫剤(products used to protect against nematode worms) and seeds. However, the in-depth investigation did not confirm these.

The commitments

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 particular:

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 competitor.

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.

International cooperation

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.