Newly Formed Dow DuPont Announces Reformed Merger Plan

It has only been couple weeks the Dow DuPont merger and already the chemical giants have announced they are making changes to its initial plans for division of the conglomerate after the finalizing of the merger. The new plan is to move sizable businesses (exceeding $8 billion in annual sales) out of the materials science division and into the specialty-chemicals unit.

The plan was originally to split the new $150 billion company into agriculture, specialty chemicals, and a materials unit; but now the company says the materials science division can better account for more heritage Dow businesses and also retain the Dow brand.

With that, DowDuPont executive chairman Andrew Liveris notes, “Our DowDuPont Board is fully aligned and confident that these targeted portfolio adjustments are the right actions to take and will benefit all stakeholders over the long term. These adjustments are fully supported by the Materials Science Advisory Committee, as they better align select businesses with the market verticals they serve.”

This new decision to transfer the spin off assets in a different way comes after a report released by Philadelphia-based business management consulting firm McKinsey & Co, who was brought on to review each of the spin off portfolios and focus on maximizing shareholder value.

Sure enough, DowDuPont CEO Ed Breen comments that the portfolio transfer will, indeed, result in more value for the shar.eholders.

He comments, “The changes we are making will enhance the competitive advantages and value creation for potential of DowDuPont and ensure the intended companies have the best possible foundation to drive long-term value for all stakeholders.”

The decision likely follows pressure from a coalition of activist investors—which includes longtime DuPont rival Nelson Peltz and Daniel Loeb from the Third Point hedge fund—to create more than 3 (as many as 7) spin-offs. The investors, of course, argue that more companies would thus increase the value of each spin off, which would result in quite the windfall for stockholders.

With that, Bernstein analyst Jonas Oxgaard wrote, in a client note, “We expect that this updated portfolio was seen by legacy Dow as the bare minimum to avoid an activist fight.”

On the announcement of the newly restructured plan, shares of DowDuPont’s bumped up about 2.5 percent in premarket trading.

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