PHILADELPHIA -- Shareholders of the DuPont Co., the multinational industrial giant that traces its roots to a Delaware gunpowder mill founded by French immigrants in 1802, voted Wednesday to combine with Michigan-based Dow Chemical Co., a larger company whose shareholders also approved the deal.
Over the next two years, DowDuPont plans to cut $3 billion in costs. Earlier this year, 1,700 jobs in DuPont's Delaware operations were eliminated.
The company will also split into three successor firms. The trio, as planned, will be a materials company based at Dow headquarters in Midland, Mich.; a pesticide and seed producer based in Wilmington, Del., but run largely from offices and labs in the Midwest; and a grab bag of DuPont's remaining businesses, at least some of which analysts expect will attract takeover offers from larger companies or investors.
The companies "are still awaiting key regulatory approvals" and could even draw a last-minute counterbid, said Carol Levenson, an analyst at Gimme Credit. The planned three-way split "makes little sense" and raises "numerous questions" about who will pay off the companies' billions in borrowings, she said.
The merger has also raised questions from farm-state senators and corporate customers who worry about reduced price competition and plaintiff lawyers trying to sue DuPont and Dow for environmental and product claims.
While disruptive to DuPont employees, and maybe to customers, the cuts and rebranding could be lucrative for DuPont's and Dow's shareholders, who have held on through decades of failed investor targets and share underperformance.
Corporate raiders including Nelson Peltz, whose hedge fund, Trian, targeted DuPont, and Dan Loeb, whose Third Point went after Dow, have argued the companies have too much corporate overhead expense and have long moved too slowly to turn expensive scientific research findings into high-profit products.
DuPont has already consolidated from its Wilmington headquarters to smaller suburban offices and reduced its central research, accounting and legal staff.
DuPont, the most valuable company in the U.S. in the 1950s, when descendants of its founding family controlled General Motors and other big DuPont customers, is still listed among the Dow-Jones 30 Industrials. But after years of pumping profits into share buybacks and dividends and disappointing acquisitions, it is now one of the smallest companies on that list.
The spinoffs and breakup mirror the way DuPont Chief Executive Officer Edward Breen made earlier fortunes for himself and other shareholders by disposing of his former corporate employers, General Instrument and Tyco International.
Even before Breen joined the board last year and, six months later, replaced engineer and DuPont lifer Ellen Kullman as CEO, DuPont had spun off a long series of businesses, including Axalta, the Philadelphia-based car-paint company, and Chemours, a Wilmington-based chemical-maker.
Chemours, which owns ex-DuPont plants along the Delaware River in South New Jersey and the Wilmington area, among other places, has warned that it is prepared to fight DuPont over the cost of settling toxic pollution claims for factories and products it inherited from its mother company.
Business on 07/21/2016