March 29, 2016


DuPont-Dow merger: New entity to face volatility in agricultural sector




The entity that would result from the recent DuPont-Dow merger is expected to face volatility in the agriculture sector, Sonoran Weekly Review reported. 


The development is based on an observation by Fitch Ratings and leaves the new organisation on a negative watch over uncertainties concerning its structure.


Fitch gave Dow's US$4.5 billion delayed draw senior unsecured term loan - which is available for up to seven draws over up to a year and is due March 2019 - an A rating and a negative watch. Dow said it entered the facility on March 22.


In the meantime, the agricultural industry could face continual challenges from low crop prices, burdening farmer incomes. The sector accounted for about 40% of DuPont's operating income.


Also, Fitch commented on plantings and earnings to be affected by weather, food prices and for corn, ethanol prices. The outcome would be short-term volatility.


Over the long term, the segment could demonstrate strong growth from DuPont's product portfolio and "new product launches", the agency said. 


About an estimated US$1 billion of DuPont's cash is not readily available. At the end of 2015, "US$4.2 billion of the US$6.2 billion cash and equivalents and marketable securities on the balance sheet was held outside of the US," the agency said


The new company, to be named DowDuPont Inc., is set to be split into three "separate" companies that will be capitalised as investment grade. The merger is still awaiting approval and is expected to conclude in the second half of 2016.


- Sonoran Weekly Review