Mergers and Acquisitions

Mergers and Acquisitions: You Decide Week 5

Keller Graduate School of Management

Course: FI561 (Mergers and Acquisitions)

Email to Present CFO Recommendation

To: Senior Executives

From: Lora Tucker

Subject: DuPont’s Divesture of Conoco

Date: January, 1998

DuPont was involved in more than 50 acquisitions and joint ventures. This includes the purchase of Conoco. Our ownership of Conoco since the 1980s has added great marketing and purchasing power to DuPont’s operations. As we work together to help the world “find solutions that safeguard life and the environment” we see great interest shown in the divesture of our subsidiary, Conoco.

We had a few setbacks that require us to address reorganizing DuPont. My associates and I have reviewed extensive research and evaluations that are provided to you in this email. Based on our findings, I recommend DuPont divest 100% of Conoco in two-stage transactions. The divesture type will be an equity carve-out of Conoco. The anticipated value is $4.4 billion. This equates to 191.5 million shares at $23. (Weston 326) We have a duty to ensure investors are fully informed about all available options as it seeks to achieve the best outcome for DuPont and its shareholders. The following information is to provide insight as to why I recommend we divest Conoco.

We have made a decision to apply the equity carve-out to reorganize DuPont. My proposal in implementing the divestiture entails selling shares in Conoco in a public offering. Offering interest in Conoco to the public will create a separate publicly traded company. DuPont will sell all of its shares of Conoco. The process includes the first carve-out for 30% of Conoco’s shares. The remaining 70% will be divested at a later time. This is in-line with our goal to maintain our competitive advantage. We are also responding to the change forces in the economy.

Growth Opportunities

A motivating factor for the divesture is to enhance value and growth....