Essay on Case Study: Dupont Divestiture of Conoco

2437 Words Oct 20th, 2012 10 Pages
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
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Conoco was involved in different aspects of the oil industry, however, which somewhat sheltered DuPont against sudden drops in the price of oil. A spin-off of Conoco meant that executives would be able to address these two issues at the same time. To determine if this was the most appropriate course of action requires looking at the situation through the eyes of CFO. This will be accomplished by: analyzing the actions that took place and possible alternatives. These different elements will help determine it the spin-off was a financially prudent transaction over the long term, or if an alternative transaction would have been more financially worthwhile.
The Actions of DuPont In 1998, the price of crude oil went into a major decline with prices collapsing to below $20 per barrel after reaching highs around $37 during the Iran oil embargo of 1979. (“Chartsbin”) Some companies within the oil industry such as Conoco In some cases were integrated producers that were somewhat protected against an overall collapse in the price of oil. Conoco had operations in different segments of the industry including: drilling, refining, transportation and production. The combination of these segments helped provide Conoco with consistent profits those profits were not as high as DuPont executives had hoped when…

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