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US chemical giants Dow Chemical and DuPont have announced a plan to merge, in a deal valuing them at $130bn (£86bn).

The all-share deal will eventually lead to the merged company, initially to be called DowDuPont, being split in three.

The three companies would focus on agriculture, materials and speciality products.

If the merger is cleared by regulators, the new company will be owned equally by current Dow and DuPont shareholders.

The companies aim to achieve the split into three within two years of the completion of the merger.

They hope to save $3bn through cost-cutting during that period.

Potential tax savings were one reason for the complicated merger-before-breakup deal, analysts said.

James Sheehan, a SunTrust Robinson Humphrey analyst, said: "They need to merge first in order for the subsequent spin-offs to qualify as tax-free transactions in the United States."

At the same time, DuPont announced a cost-saving plan that will involve cutting about 10% of staff.

Andrew Liveris, chief executive of Dow, will be executive chairman of the new company, while DuPont boss Ed Breen will be the new chief executive.

"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," Mr Liveris said.

Shares in Dow Chemical closed down 2.8% in New York, while DuPont fell 5.5%.

Dow also said that it would assume full control of its joint venture with glassmaker Corning.