23 May Merger And Aquisition
Write an 8-10 page paper (double-spaced) of written analysis, including tables of financial calculations.
It is January, 1998, the Senior Executives of DuPont are considering possible divesture of Conoco. Various executives express their opinions, and the CFO is charged with presenting his recommendation with analysis from a financial perspective. This is based on the discussion in Chapter 12: Appendix, Analysis of a Sample of Recent Divestitures, (pp. 312-327).
You are the Chief Financial Officer of DuPont. Develop your best recommendation for DuPont and its shareholders from a financial perspective. Analyze and present the actual actions that DuPont took, or change the course of history, and make another presentation, again from a financial perspective – no divestiture, partial divesture, full divesture in one step, or two-stage divestiture. Whichever decision you make, justify your recommendation with financial analysis. Focus on one recommendation and show financial analysis, advantages, and risks of the proposed recommendation. (Do not try to analyze more than one choice.)
Players
Chief Executive Officer
I’m going to propose three financial perspectives. I want you to develop a specific recommendation for one of them. First, should this divesture be made from a financial perspective? What are the benefits, disadvantages and risks? Second, if we do divest, should we divest only part of Conoco? What percent of Conoco should we divest? And third, should we divest 100% of the company? How should this divestiture be implemented? Develop a proposal and process to implement this divestiture, whereby we at DuPont maximize our shareholder value. Your recommendation may be one stage or two-stage. When you develop your specific recommendation, tell us specifically how it will work, and how it will benefit DuPont, our shareholders, and Conoco.
Chief Operating Officer
Our ownership of Conoco has been very successful, and we can do a 100% IPO of Conoco for cash and raise a significant amount to use in our core business growth internationally. This would give us the opportunity to expand our global operations in agriculture, health care, nutrition, and electronics.
Executive Vice President for R & D and Product Development
Our ownership of Conoco since the 1980’s has added great marketing and purchasing clout to DuPont’s operations. I recommend that we maintain between 51% – 60% ownership of Conoco, and support its successful growth under our continued ownership control of the company.
Given the scenario, your role and the information provided by the key players involved, it is time for you to make a decision.
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