DuPont and Chemours ‘buy out’ candidates?

SamWaltz
Sam Waltz
Publisher

Could Hagley Museum be the only remaining DuPont Company brand in Delaware by the year 2020?

Could the rest of schools, street names and the like be the artifacts of a great industrial chapter in the State’s history?

Does the “sale” of the DuPont Theatre Jan. 20 to the Grand Opera House and its renaming to the Playhouse on Rodney Square portend the future?

This column represents no 20-20 insight into the future, only a statement of the possibilities. Instead, it leverages intuition built on 40 years of DuPont-watching.

The DuPont Company, the $27 billion nutrition, ag, food products and energy company that is the legacy of the 1802 founding of an explosives company on the Brandywine by Eluthere Irenee du Pont, could end up being owned by giant Monsanto of St. Louis, MO, or a similar company, perhaps a global player outside the US.

Chemours, the newly-formed $8 billion company spinning off about July 1st from the legacy chemicals businesses, might end up being owned by chemicals giant Dow of Midland, MI, or a similar company, perhaps a global player outside the US.

Setting the stage for this reflection are these important insights, among them…

  1. By law, after meeting Society’s laws and regulations, the obligation of management is to return value to the company’s shareholders, its owners, done typically by maximizing share price and dividend.
  2. Essence of business growth today is about stewardship and deployment of capital, made more effective by IP (Intellectual Property) and innovation, business and marketing strategy, and effectiveness in management execution.
  3. Every business, every company, is “built to sell”, no matter its size.

(Full Disclosure. Like many in Delaware, I’m a former DuPont employee, in my case, having worked there 1977-93, a span of time that started in the last few years of DuPont’s Golden Age and concluded in the early years of down-sizing that has brought the company from 145,000 employees worldwide when I started to about 50,000 globally when the Chemours spinoff is complete. I’ve not spoken with anyone at DuPont for this column, but in my work inside DuPont, I worked strategically with two execs who went on to become CEOs of DuPont, and several other VPs.)

Relying on that insight, I’d predicted to several friends as long as two years ago – after having visited DuPont’s “new and improved” Chestnut Run campus – that DuPont corporate headquarters soon would be relocated there, which it announced at year-end.

At a macro level, DuPont has enjoyed two “golden periods” of about a century each. From its founding in 1802, it grew to such a position of dominance in America’s explosives and gunpowder market by the first decade of the 1900s that the US Government broke up DuPont, forcing it to spin off two sibling companies, Atlas Powder (which became ICI Americas, in turn Zeneca and AstraZeneca) and Hercules Co (which recently was acquired by Ashland).

That first century created such a powerhouse company that it was bought out in what was effectively one of the first and largest ever “junk bond” transactions, with the three du Pont Family cousins (Pierre, T. Coleman, and Alfred) issuing new equity paper to their family to consolidate and buy out their interests.

That launched the second century, a second golden period, with a foray into molecular chemistry that generated hundreds of new innovations and products that raised DuPont to the level of a global powerhouse. But molecular chemistry, too, has its limits, as the chemical industry began to discover in the 1970s, and as the pharmaceutical industry has come to grips with in the last decade.

Under the stewardship of Ellen Kullman, one of the boldest thinkers ever to occupy the 9th floor CEO suite (until midyear when she moves to Chestnut Run), she has envisioned a post-molecular chemistry DuPont, a task that had frustrated her predecessor Chad Holliday and his generation.

The real dilemma for DuPont’s management now is that in refocusing the company on food and nutrition, safety, energy, etc., it’s doubling-down its stakes in already crowded marketplaces with really significant global players.

While the quality of DuPont science and the quality of DuPont management will give it the proverbial “leg up” in this area, the reality simply is that DuPont as an asset may be worth more to some of its competitors than its current share prices indicate it might be worth to investors.

The love-hate attention being paid to “unlocking value” in DuPont’s portfolio of businesses by activist investor Nelson Peltz and his Trian Fund Management may simply validate that insight!

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