Dow, DuPont Dish on Their Pre-merger Speed Dating
When Dow Chemical Chief Executive Andrew Liveris said last fall that “everyone is talking to everyone” in the agriculture sector about deals, he actually meant it.
In a sign of just how frenzied a recent round of consolidation in the industry has been, Dow and DuPont were separately holding talks about other big deals even as they raced toward their roughly $60 billion combination late last year, according to a regulatory filing.
DuPont, under both former chief executive Ellen Kullman and current leader Edward Breen, talked with Syngenta about buying all of the Swiss pesticide and seed company or merging its agricultural business with DuPont’s.
While the filing doesn’t identify Syngenta by name, instead referring to it as Company 1, the details and discussions with people close to the deal help make the identity clear. The proxy filing, part of an effort to win shareholder approval for the deal, says that unnamed company separately worked with Goldman Sachs Group on another transaction and that Ms. Kullman flew to Geneva for a meeting. The company is defined as “a large publicly-traded company in the agricultural sciences industry.”
Syngenta had been working with Goldman bankers on its rejection of an unsolicited $46 billion bid from Monsanto The Wall Street Journal has also previously reported Syngenta and DuPont engaged in talks about merging their agricultural businesses — but it wasn’t previously known DuPont had explored the possibility of buying the company outright. (Earlier this year, China National Chemical Corp. agreed to buy Syngenta for $43 billion.)
Dow’s Mr. Liveris also flew to Switzerland for a meeting with an unnamed large company to discuss merging their agricultural businesses, the filing says. (It couldn’t be confirmed that that’s a reference to Syngenta too.) While representatives of the two sides held several talks, they remained preliminary, the filing says.
Dow also held talks with a second unnamed company over a similar tie-up that didn’t end until the Journal reported that Dow and DuPont were nearing their agreement to merge on Dec. 8, the filing says.
On Dec. 1, Messrs. Breen and Liveris told their respective boards that their combination, followed by a three way split, was the best option.
But before they got there, plenty of other talks were held between both sides and various other companies, with meetings everywhere from Switzerland to Arizona, amid falling prices and stiff competition in the industry.
In late August, DuPont’s board discussed four potential transactions: acquiring “Company 1,” combining its agricultural business with Company 1, buying Dow’s agriculture business, or a merger-of-equals with Dow.
The next day, August 27, Ms. Kullman met with the chairman of Company 1 in Geneva and discussed the chances of a deal. Michel Demare is chairman of Syngenta.
On Oct. 5 amid pressure from activist investor Nelson Peltz, DuPont announced Ms. Kullman would retire and Mr. Breen would take over. He would quickly pick up her deal discussions.
Mr. Breen met with Mr. Liveris six days later. As the Journal has reported, Mr. Breen had joked he didn’t have time to find a bathroom before Mr. Liveris called.
At the end of October, Mr. Breen, keeping his options open, set up a meeting for Nov. 12 with Syngenta in New York. At the meeting, the filing says, Mr. Demare indicated a deal seemed unlikely.
Meanwhile, a second group, aptly named Company 2 and described as a “large, publicly-traded company in the chemicals industry,” had a meeting with Mr. Breen later than month in New Jersey.
The day after the Journal reported that Dow and DuPont were nearing a deal, the chairman of Company 2 called Mr. Breen to ask again about a deal. He then sent a letter asking for due diligence.
He was too late. Dow and DuPont announced their merger the next day.
The filing also shows the merger will be a nice windfall for the banks advising on it. Former Citigroup banker Michael Klein’s boutique bank will collect more than $27 million, as will Lazard and Morgan Stanley, for their roles advising Dow. Goldman and Evercore Partners are each being paid $40 million, the filing shows.