DuPont Merger With Dow Chemical On Track To Close By End Of Q2, Argus Lowers To Hold

E I Du Pont De Nemours And Co DD reported its Q4 2016 EPS ahead of expectations. The company has posted earnings growth in recent quarters and its merger with Dow Chemical Co DOW appears on track to be completed by the end of Q2 2017, Argus’s Bill Selesky said in a report.

Selesky downgraded the rating on DuPont to Hold, citing the strong run-up in the stock. The company’s shares have appreciated 51.6 percent over the past year, versus a 40.4 percent gain in the S&P 500 Basic Materials Index.

Q4 Results

On January 24, DuPont reported its quarterly adjusted net income from continuing operations at $451 million, or $0.51 per diluted share, ahead of the consensus estimate of $0.41. “The 4Q results reflected higher operating earnings in four of the company’s six operating divisions,” Selesky wrote.

The Merger

Management expects the Dow–DuPont merger to close by the end of the first half of 2017, subject to regulatory approval. The merger had initially been expected to close by the end of Q1.

The combined company is to be named DowDuPont and plans are to split the entity into three independent, publicly traded companies through tax-free spinoffs. This plan is expected to be executed as soon as it receives regulatory and board approval, the analyst mentioned. He added that the merger is expected to generate cost synergies of about $3 billion and $1 billion in growth synergies over the next several years.