DuPont CEO Ed Breen told employees in a note Tuesday that the company plans to shave 1,700 jobs from its labor force in Delaware in an effort to pare operations before the chemical giant combines with Dow Chemical in one of the largest mergers of the year. DuPont said it plans to eliminate 10 percent of its workforce before the merger and said the first job cuts will come in early 2016, Reuters reported.
The all-stock deal is valued at $68.6 billion and was pitched as a "merger of equals" to shareholders since each company is currently worth about $60 billion. Together, the new company would be worth more than $120 billion.
The company currently employs around 63,000 people and is headquartered in Wilmington, Delaware. Part of the new company, named DowDuPont, will also be located there. Still, Delaware’s Gov. Jack Markell called the cuts “deeply disappointing.” DuPont was legally required to inform Delaware of the job cuts before the end of the year, ABC News reported.
Once combined, the companies will pursue a three-pronged strategy focusing on agricultural products, materials science and a division devoted to specialty products. The companies estimate they will save $3 billion in the first 24 months simply by sharing costs.
DuPont expects to pay out $650 million in severance packages between now and the close of the merger, projected to occur in the second half of 2016. The merger was announced in mid-December and the companies expect to reorganize into three parts within two years of the deal's close.
In addition to labor cuts, DuPont is shuttering small production facilities scattered in towns throughout the U.S. Last week, the company said it would shut down an ethanol plant in Vonore, Tennessee, before the end of the year. Before the merger was announced, DuPont said it had ceased its remaining operations at a nylon manufacturing plant in Chattanooga, Tennessee, that it had sold to another company.
Overall, 2015 marked a new high in the value of mergers and acquisitions. Deals surpassed a total value of $5 trillion for the first time in 2015, Dealogic reported. The Dow-DuPont merger was the fifth-largest deal struck in the past year, trailing Anheuser-Busch InBev’s proposed $117.4 billion purchase of SABMiller and, at No. 1, Pfizer’s takeover of Allergan, valued at $160 billion.