The story behind how two major U.S. chemical companies, DuPont and The Dow Chemical Company, completed an all-stock merger of equals to become DowDuPont.
In 2017, two major U.S. chemical companies, DuPont and The Dow Chemical Company, completed an all-stock merger of equals to become DowDuPont. This was no typical merger. The new firm immediately initiated proceedings to separate its three divisions—materials science, agriculture and specialty products—into three publicly traded companies: Dow, Corteva Agriscience and DuPont.
The audacious series of transactions was engineered by DuPont CEO Ed Breen, working together with his Dow counterpart Andrew Liveris. Ed saw long-term risks in the industry, and he knew that addressing them decisively would be key to maximizing value. “A big piece of the value of DuPont … was our agriculture division,” Breen says. “And I could tell that there was going to be a massive consolidation. If you didn’t participate in it, you were going to be left behind.”
Breen saw several areas of overlap in the businesses Dow and DuPont owned. He recognized that they could get ahead of the consolidation to come by combining forces, then spinning off into more tightly focused companies that have the agility demanded by the modern business landscape.
I always say, ‘What is the biggest lever we could pull to create long-term value?’
Executing on that vision required microscopic focus and expertise. Breen turned to longtime DuPont transformation journey partner EY. “We created a fully integrated plan to separate, realign and spin assets in a tax-efficient, timely manner,” says Anna Bourne, global client service partner for DuPont at EY.
“We had literally 700 cost actions we were taking with the synergies between Dow and DuPont,” Breen says. “We could track every action, who was responsible, how much it was going to cost and when it was supposed to be done, using EY’s Capital Edge tool.”
Maximizing value remained the north star throughout the process. “The first step is to understand how the transaction is truly going to maximize shareholder and stakeholder value in the long term,” says Sanjay Ramaswamy, partner in strategy and transactions at EY. “The next step is to look at the risks and understand what are the mitigating actions that a management team has to take to manage through these risks.”
Bourne notes that the complexity of, in her words, “getting married and immediately divorced” required clear, long-term vision and execution for three separate companies. “We asked, what should that future-state vision be?” she says. “And what was the right operating model and head-count structure for each company?”
Throughout the merger, Breen’s ability to frame his vision in terms of long-term value by recognizing shifts in the industry instilled confidence that a transaction that looked bold on paper was necessary, rational and valuable. “I always say, ‘What is the biggest lever we could pull to create long-term value?’” Breen says. “Nothing short term, but long term, where we are going to look back in five or 10 years and say we made the right decision. If you think broadly, you’re open and you’re transparent, a lot of great things can happen.”
This is part of Leadership in Action — a master class series featuring prominent CEOs highlighting the decisive moment where bold decision-making has made a material impact on their company and career.
