DuPont’s Divestiture of Conoco | Analysis of the Merger | |
DuPont began life in 1802, as a gunpowder manufacturer supplying the US Army under President Thomas Jefferson. The company had a long tradition of technological innovations in business and it continues to serve worldwide markets including food and nutrition; health care; agriculture; fashion and apparel; home and construction; and electronics. Among some of its inventions are nylon stockings invented in 1939, Teflon for pans, Kevlar for bullet-proof vests, stainmaster for carpets, the synthetic fabric lycra, and Dacron for clothing. In 1999 the company held a portfolio of 2000 trademarks and brands. DuPont was the 15th largest company in the US with its 1998 revenue
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A 1998 working paper from Pennsylvania State University examined 83 equity carve-outs done between 1981 and 1990, and found that carved-out companies had significantly higher revenue and asset growth, higher earnings, and higher capital spending than the industry average during the first three years after the carve-out--achievements, the authors say, that are a direct result of 80 percent of the deals tying executive compensation to the share price of the carved-out company at the time it goes public. "It's a way of providing a stronger incentive for subsidiary executives to perform," says James A. Miles, one of the authors of the study, along with Heather Hulburt and J. Randall Woolridge. Parent companies also benefit from a carve-out. The Penn State study, in fact, found that these companies had a higher return on assets in the first year after the carve-out. And a similar study by J.P. Morgan & Co., which examined 101 carve-outs between 1986 and 1997, documented that, on average, the share price of the parent rose between 3 and 4 percent in the 90 days following the announcement of a carve-out.
The company’s ownership of Conoco has added great marketing and purchasing clout to DuPont’s operations just like the Executive VP for Research and Development and Product