SHAREHOLDERS cheered in December when Dow Chemical and DuPont, the world’s fourth- and fifth-most-valuable chemicals companies, worth a combined $130 billion, announced plans to merge. Their share prices each shot up by nearly 12% in one day. In the hope of persuading competition regulators not to block the merger, Dow and DuPont said that within two years they would split their combined operations into three listed firms, concerned with agriculture, materials science and “specialty” products. But doubts have since grown as to how much this rationalisation will help the resulting firms cope with the pressures the industry is under.
Since markets first got wind of the deal, the shares of Dow have dropped by 18%, and DuPont’s by 21%. The S&P 500 fell by 7% over the same period. Deteriorating performance at DuPont, which on January 26th revealed a $253m loss in the fourth quarter of 2015, has shaken Dow’s shareholders. They now fear the tie-up could be too generous to the other company’s investors: on February 2nd Dow said that its profits had increased fivefold, to $3.5 billion, in the same…Continue reading