1. Dow and DuPont merge without any further plans to split. This wouldn't fly with regulators as combined entity will have too much power in US as well as worldwide. Not only US regulators but also regulators in EU and Asia will be very interested in vetting such deal.
2. Dow and DuPont swap the agriculture and specialty products divisions and merge the materials division with recent DuPont spin-off Chemours. This wouldn't fly with regulators either as both Dow and DuPont will have too much power in their respective segments.
If Dow and DuPont would have gone with option 1, the regulators would have come up with their own plan to divest certain businesses to approve merger. Instead, Dow and DuPont are offering a future split solution by proposing to split in three portions that will get them closer to option 2 with some regulator-driven divestment.
I will not be surprised when and if merger and split goes through, we land up with the second scenario anyway. Agriculture goes to Dow with HQ in Midland MI, Specialty products goes to DuPont with HQ in Wilmington DE, and Materials goes to Chemours.
I haven't seen any announced plans to have one HQ focus on one of the three businesses and the other on another, but that would make at least a bit more sense. But then, what about the third business?
If I had to guess I'd say the decision to keep both the headquarters is psychology-driven. You don't want either the Dow folks or the DuPont folks thinking that they're the target, because usually in M&A situations the acquiror keeps A LOT more of its corporate overhead. So logically, this perhaps makes the most sense as an attempt to avert the desertion of a lot of talented lawyers, accountants, HR people, and other headquarters types.
If that is in fact the case, expect an announcement about six months after the deal closes that they're consolidating their headquarters. My guess is they'd keep it in Delaware.
Kind of like when Chrysler moved out of Highland Park (near Detroit) and they lost 80%+ of their tax revenue and never recovered.
edit: words
My understanding is that Delaware has strong corporate law with well defined protections for corporations and lots of case law to back it up from their Chancery Court. The huge history of case law is really what makes the big deal from what I've read because it makes contracts enforced there (which all shareholder contracts would be) much more predictable in terms of what's allowed.
Low taxes, few constraints for internal organization, and clear answers from lawyers stemming from a rich jurisprudential history.
What it really means is Delaware and Michigan will now be in a bidding war for tax adjustments to keep the headquarters.
But my money is on Michigan.
Typically, in a combined name scenario at merger, the acquirer/bigger influencer's name is listed first. AOL Time Warner, Exxon Mobil, Chevron Texaco are some few joint names after mergers that come to my mind.
If you look at Dow and DuPont actions in last decade or so, you will notice that DuPont investors have been pushing for divestures, for example Chemours, and not acquisitions while Dow has been on acquisition binge, for example, Union Carbide, Lyondell.