Case Study: Dupont Divestiture of Conoco Essay

2433 Words Aug 3rd, 2012 10 Pages
FI561- Mergers and Acquisitions
Week 5 Case Study: DuPont Divestiture of Conoco

November 27, 2011
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Abstract In this paper, we are examining the 1998 DuPont spin off of Conoco by analyzing the transaction itself. Then, I look at one of the possible alternatives to the chosen transaction and compare that alternative with the actual long term impacts of the sale. I will then decide and recommend which option would have been the best utilized by DuPont over the long-term in order to generate the most revenue from its ownership of Conoco. DuPont purchased Conoco in 1981 and it was the largest merger in corporate history at that time. The purchase gave DuPont a secure source of petroleum feedstocks needed for many of its fiber
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(Spitz 2004, 31 – 69) This is a part of a strategy that many chemical manufacturers were utilizing at the time. The net impact of this kind of approach meant that a number of these firms would see their underlying profit margins increase exponentially. Evidence of this can be seen by looking at the tables below that illustrate the impact of integrating oil & gas related firms with chemical producers from 1980 to 1989. This is a comparison of the earnings of the top ranked firms in the industry during this time frame. (Spitz, 31 – 69)
Table 1: Top Ten Oil / Gas and Chemical Producers in 1979 Name | Revenues (in millions) | DuPont | 9,700 | Dow Chemical | 6,634 | Exon | 5,807 | Union Carbide | 5,300 | Monsanto | 5,215 | Celanese | 3,1010 | WR Grace | 2,619 | Shell Oil | 2,599 | Gulf Oil | 2,437 | Allied Chemical | 2,150 |
(Spitz, 2004, pg. 46)

Table 2: Top Ten Oil / Gas and Chemical Producers in 1989 Name | Revenues (in millions) | DuPont | 15,249 | Dow Chemical | 14,179 | Exxon | 10,559 | Union Carbide | 7,962 | Monsanto | 5,782 | Hoechst Celanese | 5,685 | Occidental Petroleum | 5,203 | General Electric | 4,929 | BASF | 4,461 | Amoco | 4,274 |
(Spitz, 2004, pg. 46)

These different figures show how oil and gas mergers with chemical producers helped the earnings of the top companies to increase. In

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