"There's simply too much debt -- $27 billion -- to make three strong, smaller
companies" out of Dow and DuPont, writes bond analyst Carol Levenson in a report to clients of the Gimme Credit LLC (corrected) corporate bond research firm.

Shareholders from both companies vote July 20 on the merger, which erupted from a "frenzy" of round-robin talks among half a dozen chemical giants last fall July 20. Why not stop there? Levenson asks. DowDuPont "would achieve the scale and all the synergies without incurring all the extra costs."

Instead, billionaire break-up artist Nelson Peltz has induced DuPont boss (and Tyco break-up artist) Edward Breen and lame-duck Dow CEO Andrew Liveris to create:

- a merged (more DuPont than Dow) farm chemicals and seeds company ("the only part of the transaction that makes sense," Levenson says) with a DuPont-like credit rating, just $5 billion in debt, and an estimated 8% additional job and cost cuts,

- a rest-of-Dow "materials science" company with a Dow-like (good but lower than DuPont) credit rating,

- a DuPont-remnant "speciality" grab-bag of remaining businesses, with "a weaker credit profile," making it the part most likely to be resold in pieces.

"Why bother go to the enormous expense of merging the companies and then splitting them up?" Levenson asks, in summary.

"Because that's what Nelson Peltz wanted... Mr. Peltz was intimately involved in structuring the separations, despite lots of well paid advisors." Still no definitive word "where the existing bonds will end up." And bond buyers beware.