NEW YORK • Dow Chemical and DuPont are in talks to merge, creating a chemicals giant with a market value of more than US$120 billion (S$168 billion) that could then break up into different businesses.
People familiar with the matter said a deal, which would face regulatory approval in several countries, would allow the two US companies to rejig their assets based on their diverging fortunes.
Their plastics and speciality chemical businesses have gained from lower energy costs, but their agrochemicals units have struggled to cope with weak demand for crop protection products.
Following what would be structured as a merger of equals, the combined company could split. That split would probably involve creating a company focused on agricultural products such as crop seeds and pesticides, another focused on speciality chemicals and a third that makes plastics and other commodities, said Mr Hassan Ahmed, a New York-based analyst at Alembic Global Advisors.
Each would find cost savings in the combination and have improved scale. "I think it's a brilliant move," Mr Ahmed said on Tuesday. "In one clean sweep, you get three outstanding companies."
An accord may be announced as soon as this week.
Dow's chief executive officer Andrew Liveris and DuPont's CEO Edward Breen would have the two top jobs in the combined company, one of the people said.
Dow and DuPont declined to comment. The Wall Street Journal first reported on the merger talks earlier on Tuesday.
Falling crude oil and feedstock prices have boosted profit margins for petrochemical producers, said Ms Anu Agarwal, Singapore-based Asia vice-president at Argus Media. Bringing the companies together would enable them to "derive value from offering a large range of chemicals to global markets".
If the deal goes through, it would be yet another blockbuster merger in what has already been one of the most fruitful years for deal makers.
More than US$4 trillion worth of deals have been since struck the beginning of this year, surpassing 2007 as the busiest year for acquisitions. The possible merger of the companies may see cost synergies to the tune of US$3 billion, CNBC said, citing informed sources.
DuPont, under Mr Breen, who took over as CEO last month, had already been in talks with rivals, including Dow, about exploring options about its agriculture business. Dow had also been reviewing all options for its farm chemicals and seeds unit, which has reported falling sales for nearly a year.