Dow Chemical Co. and DuPont are reportedly in talks to launch a $120 billion merger, people with insider knowledge revealed.
The deal, which is expected to be formally announced as early as this week, would involve the newly formed company combining their operations, then splitting them into two or three businesses focusing on agriculture, special chemicals and materials, due to regulatory and other issues, according to Reuters.
"I think a deal like this couldn't have happened 3-6 months ago," said Sachin Shah, a merger arbitrage strategist at Albert Fried & Co, noting the companies' sluggish stock performance had made a deal more feasible.
Insiders stressed, however, that the deal is still in its infancy and talks could still fall apart, reported Bloomberg. If it does go through, the new company would become the world's second largest chemical company behind BASF and surpass Monsanto Co. as the world's largest seed and pesticide company, causing DuPont's stock to be valued as much as $82 and Dow's as much as $68.
This year has seen several big mergers and acquisitions, two of which has led to the creation of the largest companies in their respective industries, according to CNN. In November, pharmaceutical companies Pfizer and Allergan revealed that they would combine in a deal worth about $160 billion to become the world's largest pharmaceutical company, while in October, Anheuser-Busch InBev announced it would buy SABMiller for about $117 billion to create the world's largest beer brewer.
Rumors of the merger caused both companies' stocks to jump 12 percent in premarket trading Wednesday, with Dow reaching a record high of $56.80 and DuPont hitting a high of $74.62.
