NEW YORK (TheStreet) --Shares of Dow Chemical (DOW) - Get Dow, Inc. Report are lower by 2.39% to $53.60 in pre-market trading Friday morning after it was announced that the company will merge with DuPont (DD) in a deal valued at $130 billion.
Shares of DuPont are slipping by 4.76% to $71 this morning.
The two chemical giants agreed to merge in an all-stock deal and are eventually planning to split into three independent publicl-traded companies.
The spinoff is expected to occur "as soon as feasible," which is anticipated to be around 18 to 24 months after the merger closes.
"This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders," Dow CEO Andrew N. Liveris said in a statement announcing the merger.
The newly-formed combined company will be named DowDuPont. The transaction is expected to close in the second half of 2016.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate DOW CHEMICAL as a Buy with a ratings score of A-. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 46.7% when compared to the same quarter one year prior, rising from $937.00 million to $1,375.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $2,511.00 million or 41.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.26%.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, DOW CHEMICAL has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: DOW