Sympathy Ways To Play Chemical Space M&A (Amidst The Dow Chemical-Du Pont Merger Rumor)

• #PreMarket Prepis a daily trading idea radio show hosted by Joel Elconin and Dennis Dick. Tune in to the daily broadcast live Monday-Friday at 8 a.m. ET here.
• On Wednesday, the hosts started the show looking into the Dow Chemical Co DOW - E I Du Pont De Nemours And Co DD merger.
• This article will focus on their views on how the deal affects the sector as a whole, and on how to play the event.

According to a Wall Street Journal article published on late-Tuesday, Dow Chemical and Du Pont are in advanced discussions to merge, and then break up the combined company into three separate ones: an agriculture company, materials and materials sciences company, and a specialty products company.

Related Link: Dow Chemical, DuPont Shares Explode After 'Mother Of All' Merger Report

While no official announcement was released yet, the stocks reacted very positively to the rumor. Dow Chemical was up 11.96 percent on Wednesday trading – hitting an all-time high, while Du Pont rose 11.85 percent.

Related Link: EXCLUSIVE: ChemChina Expected To Bid $44 Billion For Syngenta In All-Cash Deal

Now, as the shares of these companies are already up substantially on the merger rumors, how can investors play this news?

Well, there’s always ETFs. A few ETFs have huge holdings in both these companies, the anchors assured. Among them, we can count:

• Materials Select Sector SPDR XLB, which has an 11.52 percent holding in Dow Chemical and an 11.62 percent exposure to Du Pont.
• iShares Dow Jones US Basic Mater. (ETF) IYM, with more than 11 percent exposure to each of these companies.

Other chemical companies that could also get a lift from the news include:

• Eastman Chemical Company EMN, which rose 2.87 percent on Wednesday trading
• Westlake Chemical Corporation WLK, up 2.57 percent
• Praxair, Inc. PX, up 0.32 percent

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.