Nomura Meets With Dow Chemical, Now More Positive On DuPont Synergies

The forthcoming merger between Dow Chemical Co DOW and E L Du Pont De Nemours And Co DD has ushered in much talk regarding the implications of such a significantly massive conglomerate. Additionally, rumors circulated earlier this week suggested that BASF SE (ADR) BASFY, the world's biggest chemicals company, may be working its way to counter-bid for DuPont.

Needless to say, the chemicals sector continues to spark conversations, and particularly for Dow and DuPont, the speculations abound. Against this backdrop, Nomura analyst Aleksey Yefremov met with Andrew Liveris, Dow's chairman and CEO, and others on the company's management team.

Related Link: DuPont Up After Reports BASF Could Make Counter Bid Against Dow

Meeting Proves Fruitful

According to the analyst report, the "meeting suggests synergies on track," and left the analyst and his colleagues feeling "incrementally more positive."

The meeting focused primarily on the progress of the Dow-DuPont merger, while also addressing other deals Dow has in the works, including a Dow-Corning acquisition and Kuwait JVs' sale.

"Overall, we see a path to achieving the company's target of $3 billion of cost synergies within three years of closing the transaction, and optionally of up to $1 billion in growth synergies (we model $0.5 billion currently)," the analyst explained.

"We recognize that these are not easy targets to achieve – cost synergies represent 21 percent of 2016 pro-forma EBITDA for the combined company and 4 percent of sales. Still, we are giving management the benefit of the doubt here, given the extensive integration/spin-off experience of the combined DOW/DD team. We continue to see value in DOW for long-term investors," Yefremov concluded.

Nomura maintained its Buy rating and $58 price target on Dow.