DuPont Expects Further Delays in Dow Merger

DuPont Co. said it may need an additional three months to close its merger with Dow Chemical Co. as regulators around the world scrutinize a deal that would combine the two biggest U.S. chemical makers.

The transaction is now likely to be completed by the end of June, DuPont said in a statement Tuesday. The company had previously said the deal would close by the end of March.

“My gut is we are in the second quarter,” to complete the merger, DuPont Chief Executive Officer Ed Breen told investors and analysts on a conference call.

DuPont and Dow are trying to resolve global antitrust concerns about a $71 billion deal that would give rise to a chemical behemoth. The European Union, which has questioned whether the combination would slow discovery of new pesticides, granted a 10-day extension on Monday, setting March 14 as the deadline for review. The companies requested the latest delay to fine-tune a package of concessions.

DuPont ended its tradition of issuing a full-year earnings forecast because it expects the deal to close by mid-year. First quarter net income will decline about 18 percent from the prior year, partly due to an anticipated expense of 15 cents a share related to the merger, according to the statement. On an operating basis, first-quarter earnings will rise about 8 percent, DuPont said.

The shares advanced 0.7 percent to $73.32 at 9:31 a.m. in New York. DuPont climbed 33 percent in the 12 months through Monday, compared with a 19 percent gain for the S&P 500 Index.

Earnings Beat

In the last three months of 2016, earnings exceeded analysts’ projections amid cost cuts and increased sales of plastic auto parts and food ingredients.

Adjusted earnings climbed to 51 cents a share, the Wilmington, Delaware-based chemical maker said in the statement. That compared with 42 cents predicted by analysts. Revenue fell 1.7 percent to $5.21 billion. Analysts had projected $5.32 billion, according to the average of estimates compiled by Bloomberg.

Sales declined largely because the company now sells agricultural products in the southern U.S. directly to farmers rather than through third-party retailers, DuPont said.

The performance materials units increased operating earnings by 47 percent as sales volumes climbed 7 percent on demand for engineered plastics used in autos. Earnings in the nutrition and health segment climbed 50 percent on cost savings and higher sales of sweeteners and probiotics.

Cost Cuts

Earnings growth in the quarter was bolstered by a 9 percent reduction in operating costs. CEO Breen is eliminating 10 percent of the workforce under a plan to reduce annual expenses by $730 million ahead of the merger. Realized savings for the year were $750 million, DuPont said in a slide presentation Tuesday.

DuPont and Dow plan to cut another $3 billion from the combined DowDuPont Inc., including $300 million from research and development spending.

The companies also are awaiting antitrust clearance from the U.S., China and Brazil. The tie-up — along with Bayer AG’s agreement to buy Monsanto Co. and China National Chemical Corp.’s agreement to buy Syngenta AG — could reshape the agricultural-products industry.

Eighteen months after closing, DowDuPont is to split into three publicly traded entities, including an agriculture company that would be larger than market leaders Monsanto and Syngenta as they stand.

Source: AgriMarketing

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