I believe it will. The two once-great rivals no longer really compete directly against one another. Their ethylene-based products target different niches. There is little overlap.
And in the few areas where they do compete, assets can be sold off. For instance, Dow’s U.S. seed business could be sold off to German competitors eager to expand in the United States, namely BASF SE (OTC: BASFY) and Bayer AG (OTC: BAYRY).
Another factor in favor of approval is the already announced three-way breakup. That should alleviate concerns about having one chemicals behemoth dominating the market.
What will be the aftereffects of this earthshaking mega-merger?
The biggest tremor will occur in the already hot agrichemicals and seeds sector. As I discussed before, the cyclical downturn is hitting hard. Now everyone is talking to everyone in the industry about possible merger combinations. The creation of a new powerhouse in the sector will only accelerate the consolidation trend there.
Depending on how long the regulators take, the 1 +1 = 3 split should occur in 18-24 months. When that occurs, it creates a win-win-win for shareholders. As Wells Fargo (NYSE: WFC) analyst Frank Mitsch said, it’s the “deal of three centuries.”
This article is brought to you courtesy of Tony Daltorio from Wyatt Investment Research.