Dow Chemical and DuPont stand to save tens of billions of dollars in taxes because they've structured their deal as a merger of equals. Fred Katayama reports.
Cutting taxes have been driving many U.S. companies like Burger King to merge and move their headquarters abroad. but Dow Chemical and DuPont plan to save tens of billions of dollars in taxes while staying put. That's because the two have structured their $120 billion marriage as a merger of equals. They're similar in size and scope; each is valued at about $60 billion. Dow and DuPont plan to create three publicly traded companies after merging. Spin-offs can be tax-free if there's no change of control, which is just what the two claim since it's a merger of equals. Corporate tax consultant Robert Willens notes that such post-merger breakups are rare, saying, "Because it's a merger of equals, a separation which ordinarily wouldn't be tax free can become tax free by the very fact that it's a merger of equals." What's more, the two companies even share the same top shareholders: Vanguard Group, State Street Global Advisors, Capital World Investors and BlackRock. Dow and DuPont would not comment on the deal's tax aspects.