The Dow-DuPont deal is 'Financial Engineering 201'

Chemical companies DuPont and Dow Chemical agreed to combine in a merger of equals on Friday, and Wall Street is reacting to the unusual structure of the deal.

Mario Gabelli, the founder and chief executive of GAMCO Investors and the best paid CEO on Wall Street, called it "Financial Engineering 201" in a tweet on Friday morning.

That's because the deal involves the two companies combining into one - and then splitting into three separate companies via tax-free spinoffs.

From the press release:

The combined company will be named DowDuPont. The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs. This would occur as soon as feasible, which is expected to be 18-24 months following the closing of the merger, subject to regulatory and board approval.

The three new companies will be focused on agriculture, material science, and specialty products.

"Each of the businesses will have clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages, and focused investments in innovation to better deliver superior solutions and choices for customers," according to the press release.

 And here's a helpful graphic, via another tweet from Gabelli: