DuPont's Stock Drops, Dow Chemical's Rise, After Confirming Merger To Create $130 Billion Giant

DuPont & Co.'s stock fell 4% in premarket trade Friday, while Dow Chemical Co.'s gained 1.6%, after the chemical companies confirmed they were combining in a merger of equals, creating a company with a combined market capitalization of $130 billion. The new company, to be named DowDuPont, will then pursue a separation into three independent publicly-traded companies, focusing on agriculture, material science and specialty products. Under terms of the deal, DuPont shareholders will receive 1.282 shares of the combined company for each DuPont share they own, while Dow Chemical shareholders will receive one share of DowDuPont for each Dow share they own. Dow and DuPont shareholders will each own about 50% of DowDuPont. The deal, which is expected to deliver $3 billion in cost synergies, is expected to close in the second half of 2016. The separation following the deal is expected to occur 18 months to 24 months after. Separately, DuPont said it would take a $780 million charge for a plan aimed at cutting costs by $700 million in 2016. The Wall Street Journal first reported over the weekend that a deal was in the works. DuPont's stock has soared 54% over the past three months, while Dow shares have gained 25% and the S&P 500 has climbed 4.7%.