Dupont has an "employee-first" attitude that permeates the corporation and dates from its early years when the manufacture of gunpowder proved to be so risky. The Dupont family owners recompensed families of injured/dead employees by providing housing and supporting them for the remainder of their life. Safety became paramount in all operations. The attitude remains today. Despite the recent indiscretions in the LaPorte, Texas plant, Dupont is probably the safest chemical company on the planet.
If Dupont culture dominates, then this will likely prove a Renaissance for Dow. OTOH should Dupont culture be subjugated, it will ruin the value of the merger and we will all lose a company (Dupont) that has been possibly the best-run, most forward-looking corporation that has existed.
Dual headquarters usually works out about as well as co-CEOs.
To the point of DuPont having a great company culture, I agree. I used to cover them as an investment banker....they are definitely safety-obsessed.
1. Dow and DuPont merge without any further plans to split. This wouldn't fly with regulators as combined entity will have too much power in US as well as worldwide. Not only US regulators but also regulators in EU and Asia will be very interested in vetting such deal.
2. Dow and DuPont swap the agriculture and specialty products divisions and merge the materials division with recent DuPont spin-off Chemours. This wouldn't fly with regulators either as both Dow and DuPont will have too much power in their respective segments.
If Dow and DuPont would have gone with option 1, the regulators would have come up with their own plan to divest certain businesses to approve merger. Instead, Dow and DuPont are offering a future split solution by proposing to split in three portions that will get them closer to option 2 with some regulator-driven divestment.
I will not be surprised when and if merger and split goes through, we land up with the second scenario anyway. Agriculture goes to Dow with HQ in Midland MI, Specialty products goes to DuPont with HQ in Wilmington DE, and Materials goes to Chemours.
I haven't seen any announced plans to have one HQ focus on one of the three businesses and the other on another, but that would make at least a bit more sense. But then, what about the third business?
If I had to guess I'd say the decision to keep both the headquarters is psychology-driven. You don't want either the Dow folks or the DuPont folks thinking that they're the target, because usually in M&A situations the acquiror keeps A LOT more of its corporate overhead. So logically, this perhaps makes the most sense as an attempt to avert the desertion of a lot of talented lawyers, accountants, HR people, and other headquarters types.
If that is in fact the case, expect an announcement about six months after the deal closes that they're consolidating their headquarters. My guess is they'd keep it in Delaware.
Kind of like when Chrysler moved out of Highland Park (near Detroit) and they lost 80%+ of their tax revenue and never recovered.
My understanding is that Delaware has strong corporate law with well defined protections for corporations and lots of case law to back it up from their Chancery Court. The huge history of case law is really what makes the big deal from what I've read because it makes contracts enforced there (which all shareholder contracts would be) much more predictable in terms of what's allowed.
Low taxes, few constraints for internal organization, and clear answers from lawyers stemming from a rich jurisprudential history.
What it really means is Delaware and Michigan will now be in a bidding war for tax adjustments to keep the headquarters.
But my money is on Michigan.
Typically, in a combined name scenario at merger, the acquirer/bigger influencer's name is listed first. AOL Time Warner, Exxon Mobil, Chevron Texaco are some few joint names after mergers that come to my mind.
If you look at Dow and DuPont actions in last decade or so, you will notice that DuPont investors have been pushing for divestures, for example Chemours, and not acquisitions while Dow has been on acquisition binge, for example, Union Carbide, Lyondell.
As someone who lived in the area during the height of their contempt for people and the environment: FUCK DUPONT
I doubt the merger will be approved by US, EU and possibly Chinese regulators without major concessions. The subsequent 3-way split in 18-24 months is just trying to appease the regulators to approve merger. If merger goes through, there will be no major player at least in specialty chemicals in US and most probably 3-4 major players in this segment worldwide. Other proposed segments have similar issues.
The linked article is the first in a series of three that take an in-depth look at the situation, the harms, and the lack of consequences for the company until now. I expect there to be more follow-up articles as there are some lawsuits now in progress with lawyers who are armed with internal documents showing that DuPont knew about the problems for decades.
I have seen first hand how one company used a merge as a excuse to change their culture. Some people, even speculated that this was the real reason for the merge.
If you are a majority stock holder, maybe a heir, you don't see the need in this times of weak unions, pro-business laws and cheap educated available labour of keeping your employees so happy.
I don't know anything about Dupont and Dow cultures, but if it is as you explain, you can bet what culture is going to dominate.
>Dow chief executive Andrew Liveris also called it a “seminal event for our employees.”
At the risk of being gauche, one might consider "seminal event" a reasonable euphemism for "getting fucked"
Midland is an old company town, and there isn't a huge amount of chemical industry in the state, other than the Dow support system of suppliers. The other employer in town, Dow Corning, was a joint venture but (as was also announced today) is also being absorbed back into Dow.
The house prices in Midland will collapse, as lots of people move out of town together. There just aren't going to be enough open jobs in the chemical industry. I think most people will either have to retrain or retire early.
I know that's how the world works these days, but it is sad to see my hometown come to such hard times.
In other words, I think the denominator here is 10% * (63,000 current DuPont employees + 53,000 current Dow employees) = 11,600 people.
If that is in fact the case, then average severance would be a bit over $50k.
EDIT: Dow's current workforce 53k, not 58k.
Now there's an opinion you don't hear every day. Why not just leave the company if you know you can be quickly hired into a better-paid/more enjoyable job?
I would like to live in your 'normal'.
In 1905, German bromide producers began dumping bromides at low cost in the U.S. in an effort to prevent Dow from expanding its sales of bromides in Europe. Instead of competing head on with the German producers, Dow bought the cheap German-made bromides and shipped them back to Europe, undercutting his German competitors.*
A fine example of "predatory pricing" gone wrong (which happens more often than not).
Since the economics-textbook definition of the power of a monopoly is that they have power over prices, it's not entirely clear how monopolistic they will be in practice. Roundup Ready corn is nice (well, for farmers anyway) but if they raised the price too high farmers could always just switch to regular corn. And there exist alternatives to materials like Teflon and Kevlar as well.
Or, you know, if DowPont tried that with something Roundup Ready (of which, IIRC, only first-generation Roundup Ready soy is off-patent), they would lose business to Monsanto, who will not only still be the dominant seed company after the DowPont merger, but is also the creator and, for crops like corn where the initial Roundup Ready variety is not off-patent, patent-holder for Roundup Ready traits.
You are being a bit too literal.
Intel for example has / had a practical monopoly in processors for many years in PCs. The government was ok with it, based on various terms they agreed upon with Intel. The same is true of Microsoft, and countless other businesses (big and small) across the US.
There of course used to be far stricter rules on local monopolies in media (radio, tv, newspapers, cable stations etc), but those have been heavily relaxed in the last 20 years.
Market sizes vary. For airlines they look at cities or even specific airports. it doesn't matter that there are a million different airlines, if your merger creates a quasi monopoly for flights into and out of some cities. That's why in airline deals, you often see one of the two sell off routes to third party competitors.
But for chemicals and agriculture supplies--it's really an international marketplace. It doesn't really matter if they are the only US company as long as Chinese, Korean and German companies are active in selling in America.
Though the DOJ will undoubtedly look at the deal hard. Make sure things like distribution chains, retail deals etc. don't create a monopolistic effect.
(Potential supply disruptions might also be an issue, seeing as how last time I checked Germany gets most of it's natural gas from Russia through pipelines going through Ukraine, and with the latter two being at war right now....)
I wonder how come BASF and Bayer are still in business, post-WW2. From the wiki page of Carl Wurster (https://en.wikipedia.org/wiki/Carl_Wurster), the guy who re-established BASF in the early 1950s, out "of the ashes" of the infamous IG Farben:
> Wurster retained links to those he had worked with as part of the Nazi war machine and on 6 February 1959 as chairman of BASF he hosted a reunion banquet for the veterans of the pre-1945 IG Farben Vorstand. The event was attended by Otto Ambros, Heinrich Bütefisch, Fritz Gajewski, Max Ilgner, Friedrich Jähne, Carl Krauch, Hans Kühne, Wilhelm Rudolf Mann, Christian Schneider and Fritz ter Meer as well as Carl Bosch's widow.
All of those guys were Nazis, some of them convicted war criminals.
DuPont is one of my state's largest private-sector employers, and beyond that, the Dupont family's influence on Delaware is hard to overstate.
Here are a few stories from my former employer, The (Wilmington, Del.) News Journal, about the merger, touching on its potential effects on the state:
By the way, did you know that DuPont's longtime CEO Ellen Kullman resigned just a couple of months ago?
Her exit came after winning a proxy battle led by activist investor Trian Partners:
Trian, led by Nelson Peltz, wanted to break DuPont into pieces, and Peltz said that even though he lost the proxy battle, he wasn't finished with DuPont:
It's hard to imagine that the timing of the merger so soon after her departure is coincidental.
Sounds like Kullman won the battle but not the war.
I was looking for a summary of the internet and found this lovely video gem: https://www.coursera.org/learn/internetgiants/lecture/jCXgb/...
Click through the interstitial and you can watch the whole thing, which goes into mergers [relevant!] as well as AOL/TW particularly.
Needless to say, it was difficult to predict. In terms of the top websites by traffic cited in the lecture (and looked at by the FTC for monopoly review) you had (in decreasing order w/ unique visits per 1 month, units not mentioned):
AOL 61, Y! 52.7, MS 51.4, Lycos 30.8, Excite Network 27, Go Network 23, About 20.6, AltaVista 19.2, TimeWarner 15.9, Amazon 15.3
You've got a crystal ball if you could have looked at that, predicted the future, and said "Gee, joining up AOL with a media company is a really bad idea."
Bhopal Disaster happened because of Union Carbide(wholly owned subsidiary of Dow chemicals)
But, Dow, and now DuPont morally owe a lot, to the Bhopal Gas Disaster victims.
Was there another announcement Tuesday night, that set hopes high, with this one being a disappointment? What was the new information -- something about the structure of the new company perhaps?
Edit: Wednesday's article: http://www.nytimes.com/2015/12/09/business/dealbook/dow-chem... -- mentions the future split into 3 companies; does not mention the layoff details or dual headquarters though :)
Really? That's impressive, to have invented an element. Surely this must be a method of storing and transporting chlorine and not the halogen itself.
Yes we need the competition, but it's not so black/white otherwise no merge would go through.
Consumers need competition, producers avoid it where they can. Competition sucks from a producers perspective -- price equals marginal cost and profit is zero (in perfect competition).
We probably wouldn't. But these are companies, not the government. They're allowed to do things we don't like.
Yes, there is antitrust law. The U.S. Government gets to rule on whether the merger is legal, but not whether it is good for society.
"Justice Department Files Antitrust Lawsuit to Stop Electrolux from Buying General Electric's Appliance Business"
Why? Mergers are not inherently bad, and there seems to be a knee-jerk reaction against them without supporting evidence. Not to say that evidence doesn't exist, but it should if a merger is to be blocked.
Which is pretty logical, because while economical benefits of such companies are spread thinly among shareholders as well as global economies, the bad stuff they cause is always personal. So, regardless of whether good outweighs the bad or not (and I won't pretend that I know answer to that), individuals will always see them as something evil.