Case Analysis : Dupont Company

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Initially, DuPont started operating in 1802 as a gunpowder manufacturer supplying the U.S. army under the president Thomas Jefferson. It is based in Delaware. The company operated in different industries because they had a tradition of technological innovation in businesses as diverse as food and nutrition, healthcare, agriculture, fashion and apparel, home and construction, electronics, transportation and energy. During the year it evolved into a giant chemical and textile fiber company. It had revenues of $ 716 million before the merger with Conoco which had revenues of $ 1 billion. Conoco was an American oil company which was founded in 1975. Their merger was the biggest merger that ever happened. The merger
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Equity Carved-out is also known as split-off which is a type of reorganization in which a company creates new subsidiary and subsequently IPOs, while retaining full management control. What we need to know on the split off, not all shares are offered to the public; just some of the shares are offered to the public. Normally, only 20% of the shares are to be offered to the public. When the carve-out between DuPont and Conoco occurred, they each will have its own board of directors and management teams, CEO, and financials because they are operating as parent and daughter.
Equity Carved-outs can increase access to capital markets by giving the carved-out subsidiary strong growth opportunities while avoiding the negative aspect associated with the parent equity seasoned offering. The only way for a company to fully divest its subsidiary is though a carve-out which allows a prior evaluation of the subsidiary’s market value. The benefits associated with equity carved-out are:
-Greater flexibility
-Cultural change
-Volatile earnings stream separated out
-Stock useful for incentives
-Possibility of consolidation if the carved-out is less than 20%.
The drawbacks associated with the carved-out are:
-Minority Interest
-Possible taxable gains
-Difficulty to unwind
-Capital flow of constraints
-Potential tax issues
Those are the main benefits and drawbacks associated with DuPont Carved-outs of

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