Wilmington-based DuPont Co. and Dow Chemical Co. of Midland, Mich. — rival developers of plastics, pesticides, explosives, and other useful and dangerous-to-make materials — combined Thursday into one big global corporation, DowDuPont. It will trade on the New York Stock Exchange as DWDP beginning Friday, cramming into DuPont’s old spot in the Dow Jones industrial average, next to Apple, ExxonMobil, and Wal-Mart.
The merger closed at the end of the trading day on Wall Street. Shares in DuPont closed Thursday at $84.55, up 1.36 or 1.63 percent. Dow shares closed at $65.86, up 0.96 or 1.48 percent.
Top executives will address workers in a “town hall” session Friday. There were no plans to hang signs mashing the Dow diamond with the DuPont oval, no plans to speed to New York to ring the stock market bell. This is a temporary marriage of convenience, with a goal of tax and cost savings, faster product development and sales, higher profits and shareholder payouts — and then a planned breakup, into at least three independent companies, over the next 18 months.
Dow contributes two-thirds of the combined $77 billion in yearly sales, and more than half of the 100,000 employees and $150 billion in market value, but the companies call this a “merger of equals,” with eight directors from each side on the combined board. That allows the bosses to do their spin-offs without paying income tax on sales proceeds — “very, very tax-efficient and one of the reasons we are doing it this way,” as DuPont chief executive Edward Breen told shareholders when he announced the deal in December 2015.
DuPont board member Eleuthere I. “There” du Pont, who runs the family’s charitable Longwood Foundation, will not be among the directors moving up to the merged board. His departure — he and other ex-directors will still be designated advisers — ends 215 years of family members in authority, since the company’s founding by his namesake ancestor on Brandywine Creek near DuPont’s glass-walled offices.
“There are elements of this that are bittersweet. But if the du Pont family hadn’t evolved, we’d still be in the gunpowder business,” There’s brother, venture investor/philanthropist/former DuPont Co. executive Benjamin du Pont, said recently in his office overlooking the larger former DuPont headquarters on Wilmington’s Rodney Square. “You can glamorize the past. I’m not saying change is all roses. But if my ancestors were here today, I’m pretty sure they would be looking forward, not back.”
He noted that two of the three spin-offs proposed by Dow boss Andrew Liveris and DuPont CEO Edward Breen — a pesticides and farm seeds company to rival Monsanto, and a “specialty products” conglomerate of mostly DuPont biomaterials, electronics, safety equipment, and food additives (dubbed “Kevlar to cupcakes” by DuPont veterans) — are to be based in Delaware, which passed more than $30 million in state tax cuts to keep the bosses’ offices. (The rest of Dow, plus DuPont’s $5 billion automotive and “performance” group, will be a “material science” company based at Dow offices in Michigan.)
The two headquarters are a “net win for Delaware, though I’m not sure when that will equate to jobs and economic growth,” Ben du Pont said. Noting that other DuPont Co. spin-offs still based in the area — Chemours, Axalta, Endo — grew after leaving the corporate roof, “I don’t really think this is this end,” he said.
After the merger and before the spin-offs to come, the new corporate partners plan more than $3 billion in cuts to plants, people, and purchasing while they review possible tweaks in the division. That follows deep pre-merger cuts to DuPont’s former Central Research Department and central sales, marketing, and legal staff, and the planned trade of part of the pesticide business and a Newark, Del., research center to Philadelphia-based FMC Corp. to satisfy European competition rules.
The DuPont Country Club, with its three 18-hole golf courses, is up for sale. It was cited as a symbol of DuPont management insularity by Nelson Peltz, the hedge-fund manager who in 2014 took public his campaign to cut costs and boost investor profits at DuPont, mirroring a campaign by Dan Loeb against Dow.
Meanwhile, a group of downsized Central Research scientists have made peace with the slimmer corporate reality: They have set up STRIDE — the 85-member Science, Technology and Research Institute of Delaware, a nonprofit, and its for-profit affiliate, the STRIDE Institute, in hopes of continuing their R&D in DuPont’s Delaware home.
Armed with a $275,000 grant from the Longwood Foundation, last week they rented a former DuPont Experimental Station lab in a building run by a partnership among the state, the company, and the University of Delaware. They started building a business staff and have been negotiating R&D project contracts with DuPont and other chemical and materials companies, said Seetha Coleman-Kammula, a former Shell and DuPont Ph.D. scientist-executive who is STRIDE’s president.
Old-fashioned corporate science labs have been stripped by short-term financial targeting over the last 20 years, Coleman-Kammula said. She wants to bring back the “collaborative spirit.” Aided by former DuPont Co. lawyer James Dinnage, now at the Wilmington office of Eckerd Seamans, the group says it has found a model in the Mid-Atlantic Technology Research and Innovation Center (MATRIC), based at the former Union Carbide research center in South Charleston, in West Virginia’s “Chemical Valley.”
“When Dow bought Union Carbide assets in 2001, they did what they do every time they acquire something: They took the research back to Midland, Mich., and left the scientists, and the building,” Coleman-Kammula said. MATRIC says Dow “released” more than 1,000 college-educated researchers, including more than 150 Ph.D.s. The State of West Virginia helped the group buy and update the ex-Union Carbide lab, with its four-story pressure chambers and lab benches.
Sales now top $10 million a year, said MATRIC chief operating officer Greg Clutter. “It’s an amazing culture. MATRICians enjoy coming to work — we get to be creative, flexible team workers, solving real problems that matter to real customers.”
Coleman-Kammula envisions a multidisciplinary “collaborative” of scientists enlarging their ideas in constant contact with other innovators They hope to back start-ups and improve area STEM education for young people. “People have lost huge social capital, that’s been blown by corporations,” she said. “We have to bring them back together, so they talk openly, like they used to. And I bet then the music will happen.”
MATRIC also sought to back start-ups, at first. “But we saw that’s a heavy lift,” Clutter said. “Our business philosophy now is 100 percent market-driven. We are constantly understanding what customers want. We’re not doing basic academic research here. The market dragged us into being this contract research and development firm, really focused on chemical companies, and on energy and environmental work. We launch development projects, help them overcome technical challenges, and minimize costs.” The 100 employees include 35 with doctorates.
Dinnage said the group is confident the DuPont scientific legacy is so diverse that it’s not immediately clear which parts will prove most sustainable. “This is a way for them to continue to do scientific research,” he said. “You don’t know what kind of business it will turn into.”