NEW YORK (TheStreet) -- Shares of DuPont (DD) - Get DuPont de Nemours, Inc. Report are slumping by 5.53% to $70.43 in pre-market trading Friday morning after the chemical company and peer Dow Chemical (DOW) announced that they have agreed to merge in an all-stock deal valued at $130 billion.
Dow Chemical stock is also falling this morning, lower by 2.99% to $53.26 in pre-market trading.
The two chemical giants will form a combined company known as DowDuPont and are planning to eventually split that company into three publicly traded entities.
"This is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the combination of two highly complementary global leaders and the creation of three strong, focused, industry-leading businesses," DuPont CEO Edward D. Breen said in a statement announcing the deal.
"Each of these businesses will be able to allocate capital more effectively, apply its powerful innovation more productively, and extend its value-added products and solutions to more customers worldwide," Breen continued.
The spinoff is expected to occur "as soon as feasible," which is anticipated to be around 18 to 24 months after the merger closes.
The closing is anticipated to take place in the second half of next year.
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 DU PONT (E I) DE NEMOURS as a Buy with a ratings score of B-. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and reasonable valuation levels. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.90, 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 1.24, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, DU PONT (E I) DE NEMOURS has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- 38.33% is the gross profit margin for DU PONT (E I) DE NEMOURS which we consider to be strong. Regardless of DD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.79% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 18.5%. Since the same quarter one year prior, revenues fell by 17.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: DD