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Dow and DuPont to merge
- tptacek 11y ago... but will then break up into three independent publicly traded companies, one focusing on agriculture, one on materials, and one on specialty products.
- X-Istence 11y ago2 years is going to be a long time... who knows if they would follow through on that aspect of it.
- alecco 11y agoDo you imply a single landline provider, a single mobile provider, and a single ISP wouldn't be considered a monopoly?
- tptacek 11y agoI think I meant to imply that the combined company will then break up into three independent publicly traded companies, one focusing on agriculture, one on materials, and one on specialty products
- dragonwriter 11y agoIn none of those broad industries is Dow-DuPont going to be a single provider, and it won't even be the leading one in all of them.
- mattmaroon 11y agoI wonder if that was required for FTC approval.
- mtgx 11y agoGreat, so now you have not one, but three monopolies in various industries. This deal seems to be made mainly to get rid of its strongest competition in those industries.
- mbesto 11y agoThat's some serious financial engineering there.
- TheBiv 11y ago>DuPont said it expects 10 percent of its 63,000-strong global workforce will be “impacted,” and the company is budgeting for $650 million in “employee separation costs.” Analysts also expect layoffs at Dow, which employs 53,000 worldwide. >Dow chief executive Andrew Liveris also called it a “seminal event for our employees.” Seminal indeed.
- saosebastiao 11y ago$650M / 6300 ~= 100k per employee. Granted, not all of that will be allocated to severance packages, but even half of that would be a pretty phenomenal.
- Bud 11y ago...most of which will probably go to a handful of executives.
- TheBiv 11y ago"About half of employers offering two weeks' salary for each year you've worked there." http://money.cnn.com/2005/10/18/news/economy/annie/fortune_annie101805/ http://money.cnn.com/2005/10/18/news/economy/annie/fortune_a...
- pc86 11y agoThe article is over a decade old, I suspect it's less than half now.
- cschmidt 11y agoEven $100k doesn't do much for you if you live in Midland, MI and just left the only chemical company in town. You'll have to move, probably out of state, and be competing with thousands of other newly unemployed folks chasing a few jobs in a mature industry. (Disclaimer: I grew up in Midland, and my family all worked for Dow.)
- ethbro 11y ago
- metalliqaz 11y agoThe resulting 3 companies would be in separate industries, and therefore have no direct competition between them. Therefore, I would say that regulatory approval isn't certain. Probably it will be approved, but with a long list of caveats and provisions. Among them will no doubt be some environmental concessions that DowDupont would never bother following.
- pbreit 11y agoJust saw this on Twitter yesterday: "Over the long term, the future is decided by optimists."
- fweespeech 11y ago"Why yes, sir, we'd like to be 3 separate monopolies please."
- fennecfoxen 11y agoWhile it's not certain, it's only forecast to be "17 percent of global pesticide sales and about 40 percent of America’s corn-seed and soybean markets." 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.
- dragonwriter 11y ago> 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. 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.
- godzillabrennus 11y agoBubble deals are delightful. Time Warner and AOL merging marked the height of bad mergers in the last tech bubble. Since every trading company is now basically a tech company in disguise I wonder if this time around these mega deals will be seen as disastrous in the eyes of history.
- ethbro 11y agoIt marked the height of bad mergers only in hindsight. Big mergers are always hard, but that doesn't make them a bad idea. I was looking for a summary of the internet and found this lovely video gem: https://www.coursera.org/learn/internetgiants/lecture/jCXgb/the-state-of-the-internet-circa-2000 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."
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- RyanZAG 11y agoThis kind of merger seems exactly what the regulatory system was designed to prevent, right? Have any recent mergers actually been blocked? Is the regulator completely toothless now?
- jonknee 11y agoStaples and Office Depot just had their proposed merger stymied by the FTC http://www.wsj.com/articles/antitrust-suit-over-staples-office-depot-merger-likely-to-reach-court-in-march-1449615716 http://www.wsj.com/articles/antitrust-suit-over-staples-offi...
- jonwachob91 11y agoGE selling it's appliance business to Electrolux AB. Technically the FTC didn't block it, but GE did back out before the FTC made their ruling. Most likely because the FTC was going to block it.
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- timdellinger 11y agoThe combined company won't have a monopoly by any stretch: in the chemical space, it'll compete against the Germans (BASF, Bayer), and in the Ag space it'll compete against Monsanto.
- dragonwriter 11y agoIt might have pricing power, and hence a monopoly, in some more narrowly defined market than those broad spaces, though.
- Cyph0n 11y agoBut doesn't the FTC look at US companies? If a merger results in a monopoly locally, isn't that enough to warrant denying it?
- kiriberty 11y agoWow, DOJ will be busy.
- darkstar999 11y agoWhy DOJ? Wouldn't it be the FTC involved with this?
- adventured 11y agoThe FTC will be involved. The DOJ can step in and sue to try to stop mergers at their choosing. For example: "Justice Department Files Antitrust Lawsuit to Stop Electrolux from Buying General Electric's Appliance Business" http://www.justice.gov/opa/pr/justice-department-files-antitrust-lawsuit-stop-electrolux-buying-general-electrics-appliance http://www.justice.gov/opa/pr/justice-department-files-antit...
- NittLion78 11y agoAnyone else notice the headline was "jaw-dropping" but the URL was "job-dropping"?
- jedberg 11y agoNo but that's hilarious. I wonder if it was intentional.
- pvnick 11y ago>Their innovations include a sweeping variety of now-ubiquitous chemicals, including ... chlorine 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.
- _delirium 11y agoYeah, I'm not sure where they got that part. Besides obviously not inventing the actual element, neither Dow nor Dupont were the first to produce chlorine, nor even the first to produce it on an industrial scale. And they didn't invent the main process by which it's produced (chloralkali process). It's kind of a throwaway sentence in the article though, so I doubt much research went into it.
- littletimmy 11y agoCan't we stop this consolidation and keep the market competitive just by having a progressive corporate tax? Are there any arguments against such a tax?
- pvnick 11y ago>Can't we stop this consolidation 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.
- golergka 11y agoIt seems that logic in the comments is quite simple: bad companies = evil. Not monopolies, just BigCo: the bigger, the badder. 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.
- bbulkow 11y agoWe need the competition, I don't understand why as a society we would want a megacompany controlling the international chemical market.
- Beltiras 11y agoThe Masters of the Universe deem it profitable.
- ggchappell 11y ago> I don't understand why as a society we would want a megacompany .... 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.
- joslin01 11y agoThere's still international competition. Monopolies typically bring costs as low as possible for their consumers to block out competitors. This is a fairly positive net-effect. Theoretically, if a company was to get really bad PR then consumers would be OK paying more for their competitor and the great monopoly would show cracks and eventually break (unless it healed itself). Yes we need the competition, but it's not so black/white otherwise no merge would go through.
- hussong 11y agoHow would one monopolist price more competitively than a number of competing vendors? 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).
- giardini 11y agoThe two companies cultures are incompatible. 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.
- knz 11y agoDuPont is "employee first"? https://theintercept.com/2015/08/11/dupont-chemistry-deception/ https://theintercept.com/2015/08/11/dupont-chemistry-decepti... may be of interest...
- filoeleven 11y agoFor those who aren't clicking without some context: DuPont has known since the 60s that C8, or PFOA[0], a chemical used in the production of Teflon, is harmful to humans even in tiny amounts. It has knowingly concealed and lied about the harm both to its employees and everybody else, and it has continuously released it into the environment while doing all that it can to avoid taking responsibility for the harms it has caused. 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. [0] https://en.wikipedia.org/wiki/Perfluorooctanoic_acid https://en.wikipedia.org/wiki/Perfluorooctanoic_acid
- leroy_masochist 11y agoAccording to Dealbook [0], "The new company would have dual headquarters in Wilmington, Del., and Midland, Mich." 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. [0]: http://www.nytimes.com/2015/12/12/business/dealbook/dow-chemical-and-dupont-merger.html?ref=dealbook&_r=0 http://www.nytimes.com/2015/12/12/business/dealbook/dow-chem...
- deleted 11y ago[deleted]
- calvinbhai 11y agoIf "DuPont culture" mentioned in the comments is true, I hope they help Bhopal Disaster victims get the justice they deserve. Bhopal Disaster happened because of Union Carbide(wholly owned subsidiary of Dow chemicals)
- cschmidt 11y agoJust to be clear, Dow bought out the remnants of Union Carbide, after they died post-Bhophal. It didn't happen as part of Dow. Dow is extremely safety conscious, and the inexcusable things Union Carbide did would never have happened in a Dow plant.
- calvinbhai 11y agoNot denying this. Probably the lawyers ensured there exists no culpability on the buyer, for UC's past sins. But, Dow, and now DuPont morally owe a lot, to the Bhopal Gas Disaster victims.
- induscreep 11y agoNot to mention the C8 fiasco in WV, courtesy DuPont.
- xixi77 11y agoLooking at the stock chart in the article, "cool reaction from investors" they mention is a downward adjustment reversing most of Wednesday gains, but still putting each company above Tuesday close. 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-chemical-and-dupont-are-said-to-be-in-merger-talks.html?ref=topics 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 :)
- theophrastus 11y agoFarmers, or their lobbyists, would be well-advised to get very busy pressuring congress to block this. If Dow and DuPont successfully merge the control of major seed will be down to two mega-corporations; the other being Monsanto. Future prices and controls will become even less favorable for farmers. A quote from a CEO I knew: "Mergers benefit at most one CEO and a minority of stock-holders -- everyone else involved suffers, employees especially"
- jawns 11y agoDelawarean here! 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: http://www.delawareonline.com/story/news/2015/12/11/dupont-and-dow-combine-merger/77138022/ http://www.delawareonline.com/story/news/2015/12/11/dupont-a... http://www.delawareonline.com/story/money/2015/12/10/under-dow-dupont-merger-del-unlikely-retain-businesses/77109204/ http://www.delawareonline.com/story/money/2015/12/10/under-d... By the way, did you know that DuPont's longtime CEO Ellen Kullman resigned just a couple of months ago? http://investors.dupont.com/investor-relations/investor-news/investor-news-details/2015/Ellen-Kullman-to-Retire-as-Chair-and-CEO-of-DuPont/default.aspx http://investors.dupont.com/investor-relations/investor-news... Her exit came after winning a proxy battle led by activist investor Trian Partners: http://www.forbes.com/sites/antoinegara/2015/10/05/ellen-kullman-bows-out-at-dupont-amid-activist-fight-leaving-transformation-unfinished/ http://www.forbes.com/sites/antoinegara/2015/10/05/ellen-kul... 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: http://www.usatoday.com/story/money/2015/07/15/nelson-peltz-dupont-activist/30182223/ http://www.usatoday.com/story/money/2015/07/15/nelson-peltz-... 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.
- AstroJetson 11y agoAnd with the layoffs that already took place during and after the Chemours spinoff, this new round will really hurt the Delaware economy. Sad to see a great company start to die in the 90's and after three decades of bad management end up like this. At least the earlier DuPont family left things like Longwood Gardens, Winterthur, EI DuPont Childrens Hospital , etc. Chad and Ellen's legacy is 1000's of shattered families.
- necessity 11y agoFun fact about Dow: 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). * https://en.wikipedia.org/wiki/Dow_Chemical_Company#cite_note-12 https://en.wikipedia.org/wiki/Dow_Chemical_Company#cite_note...
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- anon1mous 11y agoDow and DuPont have been loosing a lot of customers to BASF in the last 5 years or so. Especially in the area of nano materials.
- timdellinger 11y agoDow sells nano materials? There's a market for nanomaterials??
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- ClayFerguson 11y agoSo we can expect the price of glassware and plastics to what, at least double right? Capitalism. Gotta love it. If you're rich.