DowDuPont Board Approves Break-Up Plan Revision

Two weeks after the DowDuPont merger finalized on Aug. 31, the company announced changes in the split-up plan of its combined businesses.

The division into three companies will remain, but the allocation of operations will change. Some of the former Dow Corning operations will move from Materials Science to the Specialty Products Division. This will appease the corporate raiders who disagreed publicly with Dow and DuPont’s CEOs over the original split.

“Everyone should realize that what is being done is not for employees’ benefit, but for the profitability of these hedge fund managers and their investors,” said Dow North American Labor Council (DNALC) and USW Local 12075 President Kent Holsing. “Employees will be subject to whatever outcome this merger and subsequent spin-off provides. These decisions aren’t made in a vacuum, but the effect on the employees and the communities they reside in are afterthoughts to what those in the corporate boardrooms and Wall Street suites ultimately wish to achieve.”

In an announcement to employees, DowDuPont said: “It is important to remember that nothing about the way that we are operating today has changed as a result of this news. We will continue to sell our products and services to customers under our heritage brand names, and each of you will continue to receive your paychecks and benefits from your heritage company. The role you have today is the role we need you to play today.

“We know we can count on you to continue to work to meet the needs of our customers and to deliver on our business commitments. Above all else, we need you to continue to work safely and live the core values of our heritage companies.”

The Shake-Out

The Materials Science Division will be named Dow and house the legacy Dow operations. Its products will concern packaging and specialty plastics, industrial intermediates and infrastructure, and performance materials and coatings. Net sales are expected to be around $40 billion.

The Specialty Products Division will focus on electronics and imaging, transportation and advanced polymers, safety and construction, nutrition and health, industrial biosciences and sustainable solutions. Net sales are projected to be around $21 billion.

The Agriculture Division remains unchanged with agricultural chemicals and seeds. The company said it “combines the strengths of DuPont Pioneer, DuPont Crop Protection, and Dow AgroSciences.”

Moved Operations

These businesses will move from the Materials Science Division to the Specialty Products Division:

  • Dow’s Automotive Systems’ adhesives and fluids platforms
  • Dow’s Building Solutions business
  • Dow’s Water and Process Solutions business
  • Dow’s Pharma and Food Solutions business
  • Dow’s Microbial Control business
  • DuPont’s Performance Polymers business Several silicones-based businesses aligned with applications in industrial LED, semiconductors, and medical
  • Molykote® brand lubricants for automotive and industrial equipment and Multibase Inc., which provides solutions for the thermoplastic compounding industry.

“Currently, we are not expecting immediate impact to the membership,” Holsing said. “This announcement may extend the time before any spin-off occurs.

“While some unionized manufacturing locations will not experience change from the original de-merger plan, it will impact others greatly. For example, most of the USW Local 12075 membership at the Midland, Mich., site will be spun off to the new agriculture and specialty products companies. Before the additional split, the majority of the membership was to remain in Dow Material Sciences.”

Why the Additional Split?

Before the additional split-off, major shareholders were concerned that the Materials Science Division would not be focused on plastics and petrochemicals if other specialty operations were thrown into the mix. After the former Dow and DuPont boards of directors and consultants at McKinsey & Co. spoke with 25 of the biggest shareholders and gathered other input, both companies’ CEOs jumped on the bandwagon in support of the further split-offs from the Materials Science Division.

“If you follow the timeline since 2014, you will see that Dow Chemical’s transformation closely mirrors what Third Point LLC, Trian Fund Management LP, Glenview Capital Management LLC, Jana Partners LLC and other shareholders pressured the company into doing,” Holsing said. “I believe the distinction here is that Dow Chemical has done it to make it seem as if it was the company’s idea and on its timeline.”

The Future

Investors and analysts have suggested breaking up the specialty business further, and DowDuPont CEO Edward Breen did not rule that out on a conference call with analysts. He said the new structure, based on customers, will set up businesses with a lot of “optionality.”

In the letter to employees, the company said it would provide answers to employees’ questions as information becomes available in the coming weeks and months.

“The DNALC and participating locals will be keeping abreast of these developments,” Holsing said. “The DowDuPont merger and split-offs will consume most of the agenda for the DNALC conference in two weeks.”

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