Dow and DuPont figured out how to make the scariest word to the American worker even scarier (DOW, DD)
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On Friday, Dow and DuPont confirmed that they would be merging to form a $130 billion American chemical behemoth.
And eventually, the combined company expects to split up into three lean-and-mean companies in what management expects to be a big win for shareholders.
A large part of this transformation is the uncovering of "synergies," which is arguably the scariest word for an employee at a company.
"Synergy" usually means the closing and combining of stores, warehouses, and offices, which also often comes with job cuts.
The managements at Dow and DuPont aren't apologizing for this. Quite the opposite. Management is actually exclaiming to shareholders in all caps in bold letters on Page 2 of its announcement:
IMDB
With by modifying "synergistic" with "highly," management has made a scary word for workers even scarier.
From the announcement: "The transaction is expected to deliver approximately $3 billion in cost synergies, with 100 percent of the run‐rate cost synergies achieved within the first 24 months following the closing of the transaction. Additional upside of approximately $1 billion is expected from growth synergies."
Dow employs around 53,000 workers worldwide. DuPont employs around 63,000.
"Approximately 10 percent of DuPont's global workforce will be impacted," DuPont management said.
Assuming Dow expects a similar cut, you're looking at 11,600 people out of the companies within the next two years.
And all of this is assuming these are conservative estimates. It's not unusual for companies to find more ways to cut.
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