DOW Chemical is in late-stage talks to merge with DuPont in what would be the largest deal in the chemicals industry, people with knowledge of the matter said.
An accord may be announced as soon as this week, the sources said.
After the merger, the company would break into two or three businesses because of regulatory and other issues, they said. There was no guarantee a deal would get done and talks might still fall apart, the sources said.
The transaction would combine two of the most storied names in US industry and create the world's second-biggest chemical company behind BASF, as well as the largest seed and pesticide company, surpassing Monsanto. Representatives of both companies declined to comment. The Wall Street Journal reported the merger talks earlier.
This year has already been a tumultuous one for DuPont, whose former chief executive Ellen Kullman stepped down in October, about five months after winning a proxy battle waged by an activist investor.
Dow's Darwin-born CEO Andrew Liveris led the company's recovery from near-insolvency during the financial crisis and has also faced pressure from an activist shareholder.
DuPont and Dow, which have market capitalisations of $US58.4 billion ($80.8 billion) and $US59 billion respectively, have in recent months confirmed they were weighing options for their agricultural chemicals businesses, both of which supply genetically modified seeds. There's been widespread speculation about potential deals in that industry as lower crop prices curb farmer spending, and after Monsanto's bid for Syngenta, which was withdrawn in August. Monsanto CEO Hugh Grant said last month that "everybody has been talking to everybody" in the industry.
The split following a Dow-DuPont merger would probably involve creating a company focused on agricultural products such as crop seeds and pesticides, another focused on specialty chemicals and a third that makes plastics and other commodities, Alembic Global Advisors analyst Hassan Ahmed said. Each would find cost savings in the combination and have improved scale, he said.
"I think it's a brilliant move," Mr Ahmed said. "In one clean sweep you get three outstanding companies."
Any antitrust issues could be overcome with modest divestitures, according to Mr Ahmed. The Journal reported that Mr Liveris is expected to be executive chairman of the merged company while DuPont CEO Ed Breen would retain that title. Making Mr Breen CEO would fit well with his strength in breaking up companies, as he did at Tyco International, Mr Ahmed said.
Based on the market values of Dow and DuPont, a merger would probably rank among the five largest deals announced this year, according to data compiled by Bloomberg.
Dow shares rose 5.5 per cent to $US53.70 in New York on Tuesday after the close of regular trading. DuPont gained 6.2 per cent to $US70.75.
