Dow Chemical's Liveris Defends 50-50 Structure of DuPont Merger

Where Does the Dow Chemical, DuPont Merger Stand?
  • Market value, earnings `quality' among factors considered
  • World's largest chemicals deal is a zero-premium transaction

Dow Chemical Co.’s chief executive officer defended Dow’s merger with DuPont Co., in which both sets of shareholders will take a 50 percent stake in the new company, saying that factors other than the strength of recent earnings were taken into account.

Speaking from Davos on Thursday, where he’s attending the World Economic Forum, Andrew Liveris said that part of the consideration was both companies’ market values, which reflect the “quality” of earnings and performance outlook. The all-stock merger announced last month is the world’s largest chemicals deal and won’t see either U.S. company pay a premium.

The transaction is an "unequitable split" that gives DuPont shareholders "more than their fair share” of the combined company’s earnings before interest, taxes, depreciation and amortization, Sanford C. Bernstein analysts led by Jonas Oxgaard said in a Jan. 8 note. Dow’s Ebitda was $9.77 billion in the 12 months through September while DuPont’s was $4.87 billion. DuPont’s current market capitalization is $46.4 billion and Dow’s is $48.1 billion.

The market usually puts a higher value on DuPont than on Dow in part because DuPont has a larger agriculture business, Liveris said. DuPont has had a higher market value than Dow 92 percent of the time over the past decade, he said.

"They have a different type of business with a different multiple attached to it," Liveris said of DuPont on in a Bloomberg Television interview. "Markets do what markets do. One might argue sometimes they are irrational."

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