HOUSTON (BLOOMBERG) - Dow Chemical Co. and DuPont Co., two historic giants of U.S. industry, will merge in a deal that's the first step in a plan to create three new highly-focused businesses.

The merger, the largest ever in the chemicals industry, will combine products from both Dow and DuPont in the areas of agriculture, commodities chemicals and specialty chemicals to create the new businesses. It comes after two years of pressure from activist investors who argued that shareholders of both companies would realize greater value if they were broken up.

Dow and DuPont will combine in an all-stock deal to create a new company, DowDuPont, with a market capitalisation of about US$130 billion (S$182 billion), they said Friday in a joint statement. Dow Chief Executive Officer Andrew Liveris, 61, will become executive chairman. DuPont CEO Ed Breen, 59, will be CEO of the new company.

Investors will get one DowDuPont share for each Dow share, and 1.282 DowDuPont shares for each one of DuPont. The eventual breakup of DowDuPont into three independent, publicly traded companies through tax-free spin-offs is expected over 18 to 24 months following the completion of the merger.

"This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders," Liveris said in the statement.

Despite its size and complexity, the deal could overcome antitrust concerns with modest divestitures, according to analysts who track the companies. The product overlap isn't extensive and the focus will probably be on seeds and crop chemicals, said Jason Miner, an analyst at Bloomberg Intelligence.

Even in those markets, Dow and DuPont compete against large rivals like Syngenta AG, Monsanto Co. and Bayer AG, Miner.