If there was still any doubt left in anyone’s mind that 2015 has been a year of mergers and acquisitions, the latest news to emerge from the US should put those doubts to rest. Numerous media report that two of the world’s largest chemicals players, Dow (Midland, Michigan / USA; www.dow.com) and DuPont (Wilmington, Delaware / USA; www.dupont.com), are in “advanced talks” about a merger. An official announcement of the deal, which would bring together two of America’s oldest companies whose combined worth comes to almost USD 120 bn, could be made as early as in the next few days. Neither company has so far commented on the reports.

Citing people in the know, US newspapers say the potential merger – which would have to meet the approval of regulatory authorities the world over – would likely be followed by a three-way breakup of the company, splitting the two group’s respective agricultural, materials and speciality activities. While Dow CEO Andrew Liveris has been tapped as the potential executive chairman of the proposed merged company, DuPont CEO Edward Breen – who was only recently confirmed in the position following the abrupt resignation of long-time chief executive Ellen Kullman (see Plasteurope.com of 12.11.2015) – will likely retain the CEO function. The merger has been billed as one of equals, news reports said, adding that as a result none of the shareholders of either company would stand to make big bucks from it.

It is, however, likely shareholder pressure that stands at the root of the companies’ alleged contemplation of a merge. Around this time last year, Dow got into the crosshairs of investor Daniel Loeb’s Third Point hedge fund, which accused the chemicals group of having betrayed the trust of its investors, and called for a breakup (see Plasteurope.com of 14.11.2014). While dismissing the accusations, Dow has since restructured its business significantly, including by selling its chlorine business to Olin Corporation (Clayton, Missouri / USA; www.olin.com) – see Plasteurope.com of 18.09.2015. More recently, the company said it will sell its stake in MEGlobal to Kuwaiti joint venture Equate (Safat; www.equate.com) – see Plasteurope.com of 27.10.2015. Both moves are part of an effort to focus on faster-growing units.

DuPont, too, has been under pressure from its shareholders, and former CEO Kullman last year also had to battle it out with the group’s largest shareholder, the Trian Partners (New York / USA; www.trianpartners.com) hedge fund – see Plasteurope.com of 22.09.2014. As in the case of Dow, Trian accused DuPont of failure to hit earnings forecasts, urging a split into autonomous business areas. While the matter was swept under the rug at the time, DuPont this year spun off its Performance Chemicals division, comprising its TiO₂, fluoroproducts and chemical solutions activities, into the independently operated Chemours Company (Wilmington, Delaware / USA; www.chemours.com) – see Plasteurope.com of 09.07.2015. About a month ago, the company followed suit by announcing plans for a complete reshuffle of its remaining plastics activities, to take effect on 1 January 2016 (see Plasteurope.com of 09.11.2015).

Reports allege that Dow’s Liveris reached out to Breen as soon as he was confirmed as permanent CEO in early November, exploring the option of a deal. No stranger to breakups, Breen is notorious for his former role as chief executive of Tyco, which under his leadership was split into three separate companies.

For the two companies’ agricultural activities, whose performance has been subpar, the merger makes a lot of sense. In fact, Dow and DuPont have been in the news these past few months because of rumours that both were weighing options for this particular business. DuPont’s Q3 sales contracted by 50% largely as a result of this particular business, and Dow, too, has not been making profit from agricultural activities. While SEC filings for the two companies’ sales after the first nine months of this year show that DuPont would be providing the largest slice of the pie in this particular business field – its agricultural business posted revenues of USD 8.2 bn up until October 2015 – Dow’s Agricultural Sciences unit generated sales of about USD 4.8 bn in the first nine months of this year. Both businesses have reportedly suffered from weaker demand for crop protection.

The two companies’ plastics activities, by contrast, have been able to benefit from lower energy costs. In this particular field, Dow holds the reins. In the first nine months of this year, the company’s plastics-related sales came to USD 23.2 bn, SEC filings show. Compared to that, DuPont’s remaining Performance Materials division posted just USD 4 bn in revenues. The Wilmington-based company also has some high-performance plastics activities, including its “Kevlar” Aramid fibres, housed under its Safety Protection business, which posted sales of USD 2.7 bn from January to October 2015.