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Dow, DuPont Mega-Merger Gets U.S. Antitrust Go-ahead


Dow Chemical DOW and DuPont DD said that the Antitrust Division of the United States Department of Justice (“DOJ”) has approved their proposed $130 billion mega-merger.

The companies have entered into a proposed agreement with the DOJ that will allow them to proceed with their planned merger. This represents another major milestone for the proposed merger transaction.

The European Commission (“EC”) conditionally approved the merger in Mar 2017 after both companies committed to sell major portions of different businesses. Moreover, the companies, last month, secured conditional regulatory approval in China and Brazil for the planned merger.

In connection with the proposed agreement with the DOJ and commitments already made to the EC, DuPont will sell certain parts of its crop protection business while Dow will sell its global ethylene acrylic acid copolymers and ionomers business.

The companies noted that the proposed agreement with the DOJ remains subject to court approval and does not require them to make any additional divestments.

Dow and DuPont continue to work constructively with regulators in the remaining jurisdictions to obtain approval for the merger. The companies continue to expect the closing of the deal to take place in Aug 2017.

Following the completion of the merger, the combined entity would eventually break up into three independent companies through tax-free spin-offs. The breakup is still expected to take place within 18 months after the completion of the deal. The merger is projected to deliver cost synergies of around $3 billion and growth synergies of roughly $1 billion.

Dow Chemical has outperformed the Zacks categorized Chemicals-Diversified industry over a year. The company’s shares have rallied 21.1% over this period, compared with roughly 19% gain recorded by the industry.

Dow is gaining from its cost-cutting and productivity actions and continued focus on consumer-driven markets. The company is seeing strong demand across major consumer-focused markets such as packaging, infrastructure, transportation and consumer care, which is contributing to volume and earnings growth.

The company is witnessing signs of positive economic momentum globally amid sustained geopolitical risks and volatility. Dow believes that the strength of its portfolio coupled with its focus on consumer-led markets will continue to serve it well in this backdrop.

Dow is a Zacks Rank #3 (Hold) stock.

Stocks to Consider

Better-ranked stocks in the chemical space include The Chemours Company CC and Kronos Worldwide, Inc. KRO. Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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