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Case Study: Dupont Divestiture of Conoco

In: Business and Management

Submitted By wecjr1
Words 2441
Pages 10
FI561- Mergers and Acquisitions
Week 5 Case Study: DuPont Divestiture of Conoco

November 27, 2011
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Abstract In this paper, we are examining the 1998 DuPont spin off of Conoco by analyzing the transaction itself. Then, I look at one of the possible alternatives to the chosen transaction and compare that alternative with the actual long term impacts of the sale. I will then decide and recommend which option would have been the best utilized by DuPont over the long-term in order to generate the most revenue from its ownership of Conoco. DuPont purchased Conoco in 1981 and it was the largest merger in corporate history at that time. The purchase gave DuPont a secure source of petroleum feedstocks needed for many of its fiber and plastics operations. Conoco also manufactured profitable commercial petroleum products and coal, produced by the wholly owned subsidiary Consolidated Coal Company. (“DuPont” 2011)
Introduction
Over the last several years, corporate America has often turned to spin offs as a way to increase their bottom line numbers. This has proven to be an effective tool in helping a firm to both divest itself of an unprofitable division and to raise large amounts of new investment capital. This money can be used to help repurchase stocks or make strategic acquisitions that will allow the firm to adapt with the changes that occur within their market place and allow it to continue to compete within that marketplace. Additionally, after such an event, the company can refocus on core segments that they believe will increase their overall profits margins. (“Spin Offs,” 2011) In the example case of DuPont, the 1998 divestiture of Conoco was completed as a way to raise new capital. When DuPont purchased Conoco in 1981, oil was selling for as much as $35 per barrel. By 1998, it had settled to below $20 per barrel and had never reached as

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