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LIZ CLAMAN, FBN: Now let's get to two other sites.
Two stalwarts of American industry bitter competitors for more than a century, have now officially announced we're married.
Dow Chemical and DuPont linking arms today in a gigantic deal worth $130 billion. When news initially broke, we had both stocks jumping. But today they are falling off along with the broader market.
We should mention that DuPont is -- is representing about 9 percent of the Dow's fall today.
So why is now the time for these two gigantic companies to get together and what will they do together that they couldn't do apart?
Joining me now, Dow Chemical chairman and CEO and president, Andrew Liveris, along with DuPont executive chairman and CEO, Ed Breen.
A fascinating day. Ed, I'll -- I'll get to you first, because DuPont is -- is very much a part of what's pulling the Dow Jones Industrials down.
We -- we get the logic of the merger and we'll get to the details in a minute.
But why -- why is the market spitting out DuPont's stock today?
ED BREEN, EXECUTIVE CHAIRMAN & CEO, DUPONT: Yes, look, Liz, I don't worry about one day in the market. We -- Andrew and I have been talking to our investors all day today. Most of our big ones we've talked to. And they love the deal. They understand the industrial logic to the deal and they understand the value we're going to create.
So, you know, one day doesn't mean anything. If you do the right deal over, you know, the ensuing days, weeks and months, you know, the right thing will happen, if we execute.
CLAMAN: Yes, and -- and by the way, we have lots of analysts' reports. I've been looking through all of them and they -- most of them really do like this.
But Andrew, the elephant in the -- I guess forget the room, the chemical lab, so to speak, is the regulators. This deal will face intense regulatory scrutiny.
And when the current climate is such that Staples can't even combine with Office Depot because it's being blocked, what makes you think they'll say yes to this massive global marriage?
ANDREW LIVERIS, CHAIRMAN, CEO, PRESIDENT, DOW CHEMICAL: It's a very unique deal, Liz. You know, the deal's structure we put in place, Ed and I worked very hard on maximum value creation and it's a merge and spin model where we've already predetermined the businesses coming out.
So this is not a scale issue in the traditional regulated Department of Justice sense.
Now, of course, we are going to go through the regulator and get all the things that need to be done.
In terms of, you used the word fierce competitors, Dow and DuPont have been complementary for a long time. We're each other's suppliers.
The one area where we do compete is in the agricultural space...
CLAMAN: Right.
LIVERIS: -- and that probably will get a little bit of scrutiny.
And maybe Ed would like to comment on that.
BREEN: Yes, we -- we've been through it. Look, both the Dow legal people and -- have looked at it. Our anti-trust people and outside counsel have looked at it. And it's very little areas where, you know, there could be a little bit of concern.
But it's amazing the size of these two companies. And we have complementary products to each other, not overlap of products.
So it's pretty amazing that, you know, there -- there really is not a big issue in that area.
CLAMAN: Well, the agriculture part of the business is exciting. But -- but get your battle gear on because you guys know, commodities are getting torched. Crop prices have plummeted. The U.S. dollar is pumping iron.
Is that going to be a tough promise to keep for your shareholders, that the ag business is going to be so exciting?
BREEN: Well, you know, one of the beauties with the ag business, first of all, this is going to make us the global leader in the business.
Secondly, we're going to have the broadest and most diverse portfolio for our customer, the farmer. And that's very important from a market share standpoint.
And third, directly to your point you just made, there are more synergies in putting these two ag business together than actually the other parts of the business, simply because of the overlap of our overhead structure.
So we have talked today to our investors about taking $1.3 billion of cost out of the combo in the ag business, yet we will have a real powerhouse of an R&D machine in that business.
So that will really help the profitability of this business very significantly.
CLAMAN: Well, I'd be remiss if I didn't bring up -- and you've heard this a million times, but you were both, in the past couple of years, well, Ed, before you became the leader of DuPont. But the companies were getting henpecked and harangued by advocate -- activists.
Ed, DuPont was harangued by Nelson Peltz, Tryon (ph). Andrew, you had Daniel Loeb on Dow's back.
Clearly, today, they may have lost the initial battle, but both guys won. You say shareholders have won regardless. But that -- that criticism is that DuPont founded -- and I was looking back on the history. I find it so interesting, early, big companies.
DuPont was founded in 1802, Dow in 1897. Some would say, at least critics, that you guys have succumbed to short-termism to satisfy advocates versus - - activists versus long-term steady success. Your companies have managed for, what, a combined 335 years.
What do you say to that, Andrew?
LIVERIS: OK, I'll go first, given you asked me.
I think the history is one thing. I think it's been widely reported that we at Dow have seen this compli -- a complementarity for over a decade.
Why?
Because of what we announced today. Actually, the deal today is even better than the one we thought about nine or 10 years ago.
Liz, the two companies are both innovators. Both have strong franchises. We've been building Dow up to have a low cost position and an innovation engine. You visited our labs in Philadelphia. You saw the innovation engine.
So DuPont has that, as well.
But we have multiple businesses each. So now, how do we get together, take synergies out of that and then create more pure play businesses?
That strategy is intact. I'd like to call Ed an activist and I'd like to call myself an activist.
Our boards have been activist because of the long-term value creation of the sensibility of creating separate portfolios.
CLAMAN: OK, well, how about -- how about this, guys?
I have been to the Pennsylvania labs. It's fascinating. What I notice most, brilliant scientists. But if I'm an employee, I'm scared today.
Am I now getting laid off?
Are my benefits getting cut?
How should employees feel about this today, Ed?
BREEN: Yes, well, look, I go back to what Andrew said, first of all, for these companies. We are building three global world leading platforms here. And that's very significant. That -- that, by the way, is growth over the long-term. And by the way, I did this before at Tyco with separating five companies.
CLAMAN: I remember.
BREEN: Every one is a leader in its respective field. It's down very well. It's grown. They've done acquisitions and they've been hiring people.
So, yes, we will go through a period with the synergies coming together on the costs, but these will be very strong companies that they can then build and grow, build up their R&D even more, come out with more products and solutions for our customers.
CLAMAN: Well, I'm looking at two alpha males.
Who's going to be the real leader here?
I know there are so many people who are wondering, who's really leading?
LIVERIS: We have put a lot of effort into that question. I think I said in an earlier discussion, we both checked our egos at the door. This plan takes shareholder value one, two and three, pragmatic, get the job done. I'm -- I'm a -- I'm a boy from the Outback, OK. I have no aspirations to be king of the hill. I want to create value for our shareholders and our employees and our communities.
The two of us, I think, hit it off. We understood each other very quickly. We get the job done. He's got the job done. Ed has been very -- very much successful.
We've got a great combination here, but it's not just us. It's we're going to work the whole governance structure and the alignment of teams the next six months to get the job done. And I'm very confident on what I've seen that Ed is the leader who can get that done.
CLAMAN: Andrew Liveris, Dow Chemical chairman and CEO; Ed Breen, DuPont executive chairman and CEO.
Great to see you both.
And I'll see you again, because I'm sure the regulatory process will be perhaps a little challenging. But maybe not. We'll see.
Thanks, guys.
BREEN: Thanks.
Thanks, Liz.
LIVERIS: Thank you, Liz.
END
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