DuPont Divestiture of Conoco

Student Name:
Course ID: FIN561 Merger & Acquisition
Assignment ID: Week 5 - You Decide Project
Instructor: Jeffrey Hardin
Date: November 29, 2013

Table of Content
Executive Summary……………………………………………………………………………………………….3

Executive Summary

1.0 Background

The divestiture of Conoco by DuPont also reflected changing conditions in the energy industry. As noted in a May 12, 1998, article in the New York Times: DuPont bought the oil company in 1981 as insurance against the pricing and supply tactics of the Organization of Petroleum Exporting Countries. But oil prices have been far less volatile than it feared, and DuPont continues to de-emphasize the petrochemical side of its business, so having Conoco as a captive source of raw material is of less strategic importance. (“DuPont to Spin Off 20% of Conoco, the Rest to be Sold Later,” p. D4.)
The divestiture of Conoco by DuPont also entailed a two-stage transaction. The equity carve-out in October 1998 represented 30% of Conoco’s shares. The remaining 70% was subsequently divested in August 1999. The divestiture was accomplished via a variant of a spin-off called an exchange offer whereby DuPont shareholders had the choice of either maintaining their DuPont shares or exchanging their stock in the parent for shares in the subsidiary.
Q1. WHY HAS DUPONT DECIDED TO SEPARATE CONOCO FROM THE REST OF DUPONT?
As part of our increased focus on our materials and life sciences businesses, in September 1998 our board of directors approved a plan to separate our oil and gas business, operated through Conoco, from our other businesses. We believe that separating Conoco from DuPont will:
- allow each company to independently access the capital markets;
- permit DuPont to expand its life sciences business, while at the same time allowing Conoco to pursue its investment