Filed by The Dow Chemical Company
Pursuant to Rule 425 under the Securities Act of 1933,
as amended, and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934, as amended
Subject Company: The Dow Chemical Company;
E. I. du Pont de Nemours and Company
Commission File No.: 001- 03433
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DuPont and Dow to Combine in Merger of Equals
Will Create Highly Focused Leading Businesses in Agriculture, Material Science and Specialty Products
December 11, 2015
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Regulation G
The attached charts include information that does not conform to generally accepted accounting principles (GAAP). Management of the companies believe that an analysis of this data is meaningful to investors because it provides insight with respect to comparisons of the ongoing operating results of the companies. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. This data should be read in conjunction with previously published reports by the respective companies on Forms 10-K, 10-Q, and 8-K. These reports, along with reconciliations of non-GAAP measures to GAAP are available on our respective websites. Reconciliations of non-GAAP measures to GAAP are also included with this presentation.
Cautionary Notes on Forward Looking Statements
This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. These and other forward-looking statements, including the failure to consummate the proposed transaction or to make or take any filing or other action required to consummate such transaction on a timely matter or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, (i) the completion of the proposed transaction on anticipated terms and timing, including obtaining shareholder and regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the new combined company’s operations and other conditions to the completion of the merger, (ii) the ability of Dow and DuPont to integrate the business successfully and to achieve anticipated synergies, risks and costs and pursuit and/or implementation of the potential separation, including timing anticipated, any changes to the configuration of businesses included in the potential separation if implemented, (iii) potential litigation relating to the proposed transaction that could be instituted against Dow, DuPont or their respective directors, (iv) the risk that disruptions from the proposed transaction will harm Dow’s or DuPont’s business, including current plans and operations, (v) the ability of Dow or DuPont to retain and hire key personnel, (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, (vii) uncertainty as to the long-term value of DowDuPont common stock, (viii) continued availability of capital and financing and rating agency actions, (ix) legislative, regulatory and economic developments and (x) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks, as well as other risks associated with the proposed merger, will be more fully discussed in the joint proxy statement/prospectus that will be included in the registration statement on Form S-4 that will be filed with the SEC in connection with the proposed merger. While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Dow’s or DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. Neither Dow nor DuPont assumes any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
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Important Information About the Transaction and Where to Find It
In connection with the proposed transaction, Dow and DuPont will cause DowDuPont to file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a joint proxy statement of Dow and DuPont and that also will constitute a prospectus of DowDuPont. Dow, DuPont and DowDuPont may also file other documents with the SEC regarding the proposed transaction. This document is not a substitute for the joint proxy statement/prospectus or registration statement or any other document which Dow, DuPont or DowDuPont may file with the SEC. INVESTORS AND SECURITY HOLDERS OF DOW AND DUPONT ARE URGED TO READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the registration statement and the joint proxy statement/prospectus (when available) and other documents filed with the SEC by Dow, DuPont and DowDuPont through the web site maintained by the SEC at www.sec.gov or by contacting the investor relations department of Dow or DuPont at the following:
Dow DuPont
2030 Dow Center 974 Centre Road Midland, MI 48674 Wilmington, DE 19890 Attention: Investor Relations Attention: Investor Relations
+1 989-636-1463 +1 302-774-4994
Participants in the Solicitation
Dow, DuPont, DowDuPont and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Dow’s directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is contained in Dow’s Form 10-K for the year ended December 31, 2014 and its proxy statement filed on March 27, 2015, which are filed with the SEC. Information regarding DuPont’s directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is contained in DuPont’s Form 10-K for the year ended December 31, 2014 and its proxy statement filed on March 23, 2015, which are filed with the SEC. A more complete description will be available in the registration statement on Form S-4 and the joint proxy statement/prospectus.
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
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A Combination Unlocking Exceptional Value Across Three
Leading Businesses
DowDuPont
Agriculture Material Science Specialty Products
Revenue: ~$19B1 Revenue: ~$51B1 Revenue: ~$13B1
Highly-synergistic merger of equals projected2 to unlock ~$30 billion of market value
Intent to pursue tax-free3 separation into three independent companies:
Leading Global Pure-play Agriculture Business
Leading Pure-play Material Science Business
Leading Technology and Innovation-driven Specialty Products Business
Transaction creates ~$3 billion in cost synergies
Opportunity for potential growth synergies of ~$1 billion
1. Based on Dow and DuPont’s Net Sales as reported in each companies’ 2014 Form 10-K filing. Dow values have been adjusted to exclude Dow Chlorine Products’ third party sales, as defined in the 9/2/15 S-4/A filing made by Olin Corporation. DuPont’s Net Sales exclude the Performance Chemicals segment.
2. Projected $30B in market value based on assumption of an EV/EBITDA multiple of 10x on the $3B in synergies. 3
3. Refers to U.S. taxes only. Intended separation may incur taxes in other jurisdictions.
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Creates Global Leaders Based on Strong Industrial Logic
Agriculture Material Science Specialty Products
Revenue: ~$19B1 Revenue: ~$51B1 Revenue: ~$13B1
Electronics & Consumer Solutions: Agriculture Agricultural Sciences Performance Plastics Performance Materials Communications—Dow Electronic Performance Materials Materials Nutrition & Health
& Chemicals
Infrastructure Solutions Industrial Biosciences
Consumer Solutions:
- Consumer Care Safety & Protection
- Dow Automotive Systems
INDUSTRY LEADERS FOCUSED ON CORE COMPETENCIES
Broad offering and robust Low-cost integration and innovation World-class innovation process pipeline across germplasm, combined with expanded customer and application development biotech traits and crop protection offerings in key growth sectors capabilities
Attractive Investment Profiles with Stronger Product Offerings to Better Serve Customers
Note: Numbers may not sum due to rounding.
1. Based on Dow and DuPont’s Net Sales as reported in each companies’ 2014 Form 10-K filing. Dow values have been adjusted to exclude Dow Chlorine Products’ third 4 party sales, as defined in the 9/2/15 S-4/A filing made by Olin Corporation. DuPont’s Net Sales exclude the Performance Chemicals segment.
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Transaction Overview
All-stock merger of equals transaction
Transaction Combined company will be named DowDuPont
Combined market capitalization of approximately $130 billion at announcement
Structure Anticipated separation into three independent, publicly traded companies expected
to occur as soon as feasible
DuPont shareholders to receive 1.282 shares of DowDuPont for each DuPont share
Shareholder Dow shareholders to receive 1.00 share of DowDuPont for each Dow share
Considerations Dividend policy to be consistent with current policies at both companies
Targeting an investment grade credit rating
Andrew N. Liveris will be named Executive Chairman
Edward D. Breen will be named CEO
DowDuPont Board of Directors to have 16 directors, consisting of eight current Dow
Governance directors and eight current DuPont directors, including Breen and Liveris, and two
independent co-lead directors
Advisory Committees to be established for the Agriculture, Material Science and
Specialty Products businesses at time of transaction closing
Location Dual headquarters in Wilmington, Delaware and Midland, Michigan
Closing \ Shareholder approval required from both companies
Expected transaction closing in 2H 2016
Considerations Subject to regulatory approvals and other customary closing conditions
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Total Cost Synergies of ~$3 Billion
Total DowDuPont Synergies Cost Synergies by Business
Total Cost Synergies ~$3B ~$3B
~$0.3B
Total Growth Synergies ~$1B Specialty Products
Total Synergies ~$4B ~$1.5B Material Science Agriculture
~$1.3B
Costs to Achieve1 $3.5B—$4.1B
Cost Synergies by Function
~$3B
~40% ~30% ~20% ~10%
COGS SG&A Leveraged Services R&D
100% of Run-Rate Cost Synergies Achieved within the First 24 Months from Transaction Closing
Note: Numbers may not sum due to rounding.
1. One-time integration costs.
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Significant Cost Synergy Opportunities
Agriculture Material Science Specialty Products
Drive seed production and Leverage R&D spend
Optimize global footprint
go-to-market cost (programs, resources,
across manufacturing,
efficiencies sites) in the electronics
sales and R&D facilities
Eliminate duplicative R&D space
Capture feedstock /
Business Synergies programs including Optimize manufacturing in
hydrocarbons synergies
breeding, traits and the electronics space
Enhance operational
chemical discovery Leverage raw materials
excellence in production
Enhance supply chain and buy in key market
cost efficiencies
global site optimization segments
Reduce corporate and leveraged services costs
Corporate Synergies Realization of significant procurement synergies
Total Cost Synergies ~$1.3B ~$1.5B ~$0.3B
Transaction Synergies are Above and Beyond Dow and DuPont Standalone Cost Reduction Programs
$700 million in cost reductions to be realized in 20161
Business and corporate costs
3-year, $1 billion productivity plan (2015-2017)
$300 million to be realized in 2016 (prior to expected transaction close)
1. Replaces DuPont’s prior guidance on cost savings.
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Creates Leading Global Agriculture Company
World’s leading production agriculture business with most comprehensive and diverse seed and crop protection portfolio with exceptional opportunity for growth Rich history and sustainable commitment to production agriculture Robust innovation pipeline of germplasm, biotech traits and crop protection technologies Market access driving grower benefits through complementary offerings with broader access and deeper customer intimacy in every geography
#1 Player with Most Comprehensive and Diverse Seed and Crop Protection Portfolio
2014 Revenue ($ in billions) Crop Protection Seeds
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$19
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$16 3 $14
$12 4 $11
$7 $7 5
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MON SYNN BAYN BAS
Source: Company information. Based on Dow and DuPont’s Net Sales as reported in each companies’ 2014 Form 10-K filing. Dow values have been adjusted to exclude
Dow Chlorine Products’ third party sales, as defined in the 9/2/15 S-4/A filing made by Olin Corporation. DuPont’s Net Sales exclude the Performance Chemicals segment. Note: Numbers may not sum due to rounding.
1. $19B includes AgroFresh which was divested on 7/31/15.; 2. Monsanto 2014 revenues are calendarized.; 3. Syngenta revenues reflect only crop protection and seeds segments. Excludes eliminations and Lawn & Garden segment.; 4. Bayer revenues exclude environmental science segment, converted at USD/EUR rate of 1.32.; 5. BASF 8 revenue converted at USD/EUR rate of 1.32. 6. BASF.
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Complementary Strengths Across Product Offerings
Combines Portfolios of Leading Products… …With Strong Capabilities Driving Future Growth
Emerging Seed Brands Traits Germplasm ermpla Traits Insecticides n i e Herbicides He icide Fungicides Fu gicide Tech ts Insect
Corn
Trai Control
/
Portfolio
Soy
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Specialty
Germplasm Cotton
Advanced Technologies
Wheat
Insecticides Herbicides Fungicides
Canola
Fruits & Veg
Picoxystrobin
Protection Other
Other Emerging Crop Technologies
Indoxacarb
Sulfonylureas
Emerging Established Capabilities Strength
Pyroxsulam
1. This product is fully approved in the U.S. and Canada. Traits included in these products may or may not be approved in all global markets.
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Creates A Leading Global Material Science Company
Fulfills Dow’s long-term vision of becoming a fully integrated pure play materials company Leader in materials with competitive offerings for customers in high-growth, high-value sectors
Leading solutions provider to key industries through expanded leadership in packaging innovation as well as performance plastics, elastomers, fibers for engineered applications in transportation and construction Enhances opportunity to cross-sell in a number of key end markets, including packaging, transportation and infrastructure solutions: Leverage complementary products and channel overlap (i.e., in automotive) Improves cost position: Leverages Dow platform (i.e., low cost feedstock) Bolsters innovation leadership: Broad and shared scope of technology and application development capabilities
Industry-leading Integration and Innovation Powerhouse
$66 1 2014 Revenue ($ in billions)
$51 $45 $40 $32
$19 $17 2 $16
$13 3
$11 $11 $6
BAS HON MMM AKZA EVK 3 PPG SOLB SHW EMN
Source: Company information. Based on Dow and DuPont’s Net Sales as reported in each companies’ 2014 Form 10-K filing. Dow values have been adjusted to exclude Dow Chlorine Products’ third party sales, as defined in the 9/2/15 S-4/A filing made by Olin Corporation. DuPont’s Net Sales exclude the Performance Chemicals segment.
USD/EUR rate of 1.32. Note: Numbers may not sum due to rounding. 10
1. Excludes revenues from Agricultural Solutions, Oil & Gas and other segment revenues.; 2. Pro forma for acquisition of Comex.; 3. Pro forma for acquisition of Taminco.
3. Evonik Industries.
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Integration and Innovation with Low-Cost Position
Underpinned by Operational and Commercial Excellence
Low Cost Monomers Science & Engineering Key End Markets
High-Throughput
Packaging Research Catalyst Discovery Ethylene & Ligand Synthesis Transportation
Polymer Science Construction Blocks Material Science Electronics
Formulation Consumer
Building Platforms Sciences Solutions
Propylene Process Engineeri
Energy/Water
High-Performance
Durables & Industrial
pplication Development Agriculture
70% OF REVENUE FOCUSED IN THREE KEY END MARKETS
Packaging Transportation Construction
Leader in thermoplastics, elastomers, finished parts Leader in OEM glass bonding, aftermarket glass The greatest breadth of acrylic chain technologies, and biopolymers bonding, structural bonding and brake fluids including industry-leading positions in acrylic binders,
World’s largest packaging materials supplier #2 position in rubber-to-metal bonding and HEUR rheology modifiers, dispersants and opaque
Leading global provider to the electrical and polyurethane systems applications for tier suppliers polymers telecommunications industry Leader with broad portfolio of solutions, spanning • Leader in extruded polystyrene foam insulation and “under the hood”, exteriors and “in the car” cellulosic-based construction chemical additives
Leader in lightweighting platforms for transmissions, Leader in one-component foams in retail and acrylic-driveline and structural bonding based construction chemicals in North America
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Material Science: Packaging and Transportation Examples
Five-layer Plastic Food Package – Packaging Example Multi-layer Films Key Takeaways
Film and sheet represent majority of PE and EVA market
Multilayer films are very popular in food and beverage due to unique properties (e.g., thickness, strength, sealing properties)
Delivers value to customers by taking an integrated approach to their design needs
Packaging is a growth end market as more of the world desires convenience foods with increased packaging functionality
Multilayer is often a combination of DuPont and Dow products
Example packaging layers
160
Inner Layer
140 LLDPE
120
EVA icrons) 100
(m Inner Layer
60 Surlyn® Nylon
80
Nucrel®
Thickness 40 EVA LDPE Nucrel®
20
LLDPE Nylon
0 Outer Layer Outer Layer
Example 1 Example 2
Combination Establishes Material Science as a Leading Solution Provider – Automotive Example Advantages Opportunities
Leader in thermosets for automotive applications
Broad auto exteriors and “in the car” portfolio
Leader in high performance engineered resins and parts
Broad “under the hood” portfolio
DowDuPont
Leverage complementary prod and channel overlap – same customers / end markets for different products
More complete solutions for multi-material platforms at OEMs
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Creates Leading Specialty Products Company
Unique businesses that share similar investment characteristics and focus in specialty products Core strengths in technology development and innovation: Clear capital allocation focus
“Asset lite/high touch”: Value added businesses driven by secular trends in consumer spending Leading brands: Tyvek®, Kevlar®, Nomex® and Tedlar® Scale across portfolio: Global leadership in each business segment
Electronics &
Nutrition & Health Industrial Biosciences Safety & Protection Communications
~$4B ~$4B ~$1B ~$4B
Process technologies
Biomaterials & consulting Aramids Revenue Health services Solid 2014 Surfaces Nutrition Enzymes
Nonwovens
Solar PV materials Texturants & systems Biofuels (1st and 2nd gen.)• Aramid fibers & paper
CMP pads Emulsifiers Protective garments
Bioactives
Lithographic materials Tyvek® ding Cultures & probiotics—Animal nutrition
Metallization material Kevlar® Lea—Home & personal care Nomex®
Positions
- Brewing & baking
Corian®
Biomaterials (PDO)
Hitachi Ingredion Novozymes Honeywell
Air Products Kerry DSM 3M cted Shin-Etsu DSM DSM
Poet-DSM
Asahi Kasei Tate & Lyle Teijin Sele Codexis Competitors Cabot Microelectronics FMC
Chr. Hansen
Based on Dow and DuPont’s Net Sales as reported in each companies’ 2014 Form 10-K filing. Note: Numbers may not sum due to rounding.
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A New Global Electronics Products Leader
Combination of DuPont’s Electronics & Communications and Dow Electronic Materials creates the technology leader across four high growth segments: semiconductor materials, advanced packaging, solar-photovoltaic materials and display materials
Key Areas of Complementary Strengths Value and Growth Drivers
Innovation capabilities – Enabling next-gen technical advances Photoresist, ARCs, Etchants in semiconductor, solar PV, electronics packaging and displays
Scale – Broad portfolio of OLED
CMP pads, slurries and next-gen display offerings; manufacturing leverage opportunities Metallization materials Growth in adjacent portfolios –
Larger toolkit to solve customer cost and performance challenges Solar backsheet, encapsulants?—in solar, miniaturization in semiconductors and advanced packaging Electronics packaging
Leverage customer relationships –
Complementary presence in Asia, stronger relations with key solar Display materials and electronics companies
Creates a Market Leader with the Broadest Technology Offering in the Industry
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DowDuPont Financial Profile
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DowDuPont
Revenue ~$54B ~$28B ~$83B
Operating
~$9B ~$6B ~$15B
EBITDA
Operating EBITDA
~17% ~21% ~18% margin %
45% of 25-45% of Cash Consistent with Current Dividend Policy Net Income from Operations Policies at Both Companies
Targeting an Investment Credit Rating3 BBB/Baa2/BBB A-/A3/A
Grade Credit Rating
Net Debt4 $12.1B $6.2B $18.3B
Plus Total Cost Synergies of ~$3 Billion
Source: Based on Dow and DuPont’s Net Sales and EBITDA as reported in each companies’ 2014 Form 10-K filing. Note: Numbers may not sum due to rounding. 1. Dow values have been adjusted to exclude Dow Chlorine Products’ third party sales, as defined in the 9/2/15 S-4/A filing made by Olin Corporation. 2. DuPont’s Net
Sales and EBITDA exclude the Performance Chemicals segment. 3. S&P/Moody’s/Fitch. 4. Net debt as of 9/30/15. Dow net debt figure excludes $3B net debt reduction 15 following close of RMT transaction with Olin in October 2015.
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Governance Highlights
Merged Entity
Andrew N. Liveris to be named Executive Chairman with focus on Material Science Edward D. Breen to be named President and CEO with focus on Agriculture and Specialty Products Breen and CFO are collectively responsible for DowDuPont’s financial oversight Combined Board of Directors to have 16 directors, consisting of eight current Dow directors and eight current DuPont directors, including Breen and Liveris, and two independent co-lead directors
Intended Separation into Three Companies
Advisory Committees to be established for each of the intended companies: Agriculture, Material Science and Specialty Products at time of merger closing Breen to be responsible for establishment, integration and operation of Agriculture and Specialty Products Liveris to be responsible for the establishment, integration and operation of Material Science
In these roles, both Liveris and Breen will report to the Board of Directors
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Transaction Creates Global Leaders in Agriculture, Material
Science And Specialty Products
Strong Industrial Logic: Highly complementary companies create strong, focused businesses with enhanced scale, unique growth strategies and differentiated technologies
Financially Compelling: MOE unlocks significant market value through total cost synergies of ~$3 billion
- Tax-free structure maximizes value- Creates three powerhouse companies
Customers Win: Superior solutions, complementary offerings and expanded choices
Attractive Investment Profile: Creates distinct financial profiles and clear investment thesis for each business
Drives Significant Long-term Value for All Shareholders
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APPENDIX
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DuPont Non-GAAP Reconciliations
RECONCILIATIONS OF ADJUSTED EBITDA TO CONSOLIDATED INCOME STATEMENTS
(dollars in millions, except per share)
2014
Income from continuing operations before income taxes $ 4,313
Add: Significant items (benefit) charge before income taxes(1) (209)
Add: Non-operating pension/OPEB costs 128
Operating earnings before income taxes $ 4,232
Less: Net income attributable to noncontrolling interests from continuing operations 10
Add: Interest expense 377
Add: Depreciation and amortization 1,366
Adjusted EBITDA from operating earnings $ 5,965
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For complete details of significant items, see DuPont’s quarterly earnings news releases. |
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Dow Non-GAAP Reconciliations
RECONCILIATIONS OF ADJUSTED EBITDA
(dollars in millions, except per share)
EBITDA Reconciliation 2014
Net Income Attributable to The Dow Chemical Company $ 3,772
+ Net Income Attributable to Noncontrolling Interests 67
+ Provision for Income Taxes 1,426
Income Before Income Taxes $ 5,265
+ Depreciation and Amortization 2,747
- Interest Income 51
+ Interest expense and amortization of debt discount 983
Earnings before interest, income taxes, depreciation and amortization (EBITDA) $ 8,944
Adjustments for Certain Items, included in EBITDA
Asset impairments and related costs $ (73)
Asbestos-related charge (78)
Dow Corning Implant Liability Adjustment 407
Charge related to Dow Corning’s Clarksville, TN site abandonment (500)
Costs associated with portfolio and productivity actions (49)
Warranty accrual adjustment of exited business (100)
Total Certain Items included in EBITDA $ (393)
Operating EBITDA (non- GAAP) $ 9,337
Less: EBITDA related to Dow Chlorine Products (Source: Olin Corporation 9/2/15 S-4/A filing) $ 235
Operating EBITDA excluding Dow Chlorine Products $ 9,102
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