Shares of Dow Chemical and DuPont shot higher on Wednesday on word the two giants could head for a huge $130 billion merger. Bobbi Rebell reports.
Dow Chemical and DuPont could be headed to the altar. Both stocks shot up more than ten percent on Wednesday on reports of advanced merger talks that could combine the conglomerates in what would be a $130 billion deal. Analysts say a potential marriage would likely combine the two companies, then eventually split them into three companies, aligned with their agriculture, materials and specialty chemicals businesses. Both companies have been under pressure by activist investors pushing for a breakup to unlock value in each line of business. For example, Dow and DuPont are struggling with falling demand for farm chemicals. But their plastics business units have seen higher profit margins, because of low natural gas prices. Jeff Stafford covers the companies at Morningstar: SOUNDBITE: JEFF STAFFORD, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "I do think the deal will get done. There are some regulatory concerns. I don't think that will be enough to stop the deal. We'll see on that. If it's a good idea or not? That is going to depend on the details of the merger" Those details include cost savings. Reuters M&A Correspondent Mike Stone: SOUNDBITE: MIKE STONE, REUTERS M&A CORRESPONDENT (ENGLISH) SAYING: "These are $65 billion companies each. And the savings that they are going to be able to squeeze out of their research and development budgets, their workers through laying them off and through getting their supply chains a little slimmer, is somewhere in the $3 to $10 billion range, my sources are telling me." Stone adds that he expects the deal to be officially announced on Thursday.