Shareholder Pressure Fueling Dow-DuPont Merger Talks

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By Jacob Maslow

Shareholder pressure and weak farm demand may be the driving forces behind the merger talks between DuPont (NYSE:DD) and Dow Chemical Co. (NYSE:DOW.WD). According to economists, a deal of this magnitude would have been unlikely just a few months ago.

Stocks for both companies were up 12% on Wednesday. Dow reached a high point of $56.80, while DuPont peaked at $74.62.

Wall Street Journal reported on Tuesday that both companies were in the advanced stages of merger talks. If the $120 billion deal goes through, the new company would split into three businesses, which would include specialty chemicals, agriculture and materials.

Experts say a deal of this magnitude would not have happened 3-6 months ago. Andrew Liveris, CEO of Dow Chemical Co., said in October that the company was not seeking a merger.

The merger would value DuPont’s stock at $82, and Dow’s at $68. Both companies have been struggling amid a decreased demand for farm chemicals and increased pressure from activist investors. And reports of the deal, come just one week before the expiration of a standstill agreement between Dow Chemical Co. and Daniel Loeb. Under this agreement, Loeb was to refrain from criticizing the company publicly for one year. DuPont also faced pressure from activist investor Nelson Peltz, who called for the company to separate its nutrition, biosciences and agriculture units from its building and safety materials units.

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