Dow Chemical Co. (NYSE: DOW – $64.39) and DuPont confirmed they reached an agreement for approval from the U.S. Department of Justice’s antitrust division for their proposed merger. Under the deal, and consistent with commitments already made to obtain the European Commission’s regulatory approval, DuPont will divest certain parts of its crop protection portfolio and Dow will divest its global ethylene acrylic acid copolymers and ionomers business. The companies said the proposed agreement with the DoJ, which remains subject to court approval, does not need the companies to make any additional divestitures. “With this agreement, no further approvals are required in the U.S. for the merger to close,” the companies said. The combination is expected to generate cost savings of approximately $3 billion and growth synergies of about $1 billion. The merger is expected to close in August with the intended spin-offs to occur within 18 months of closing.
Midland, Michigan-based Dow has decent total return potential, which should improve post-merger and is helped by a generous dividend yield of nearly 3%. I envision healthy growth from the company’s diversified portfolio over the pull to early next decade, but will re-evaluate the newly combined operations once the divestitures are made clearer.