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Du Pont- Conoco IPO Carve Out and Split Off Case Analysis
Du Pont- Conoco IPO Carve Out and Split Off Case Analysis

SUMMARY
E.I. du Pont de Nemours and Company, global leader in the technological innovation in business and the fifteenth largest company in the US in 1999, decided to divest its subsidiary Conoco, major and integrated oil and energy company, previously acquired through an M&A deal of $7.8 billion. In fact DuPont decided to move the company from its traditional energy and chemical businesses towards life science (agriculture, biotechnology, pharmaceutical) in a major operation of refocus on the core business. What became clear to DuPont shareholders was that they were not benefiting from being either a special chemical company, life science company or oil company: the price-earning multiple of the entire company was less than any of its representative sectors.

Initially, the strategy of the new CEO was to increase share price through the division of the company in three sectors, of which life science represented the one most heavily funded. However, while company share price was predicted to rise to $90, it fell to $60.

For these reasons it was opted for a divestiture through a split-off: DuPont would allow to trade each DuPont stock for 2.95 Conoco stocks, up to a total of 148 million DuPont shares. Once the deal was announced, DuPont shares soared 11% at an all-time high of $79.50 per share

The strategy would have been executed first through an IPO carve out, then a split off

FIRST STAGE: ROLE OF THE IPO
The strategy implied an initial IPO stage for various purposes: first of all, it would allow to raise money in order to repay debt and other intercompany notes with DuPont, plus giving Conoco the possibility to pay a $7.5bn dividend to the parent company.
Secondly, trading Conoco shares would allow to

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