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DuPont to divest Conoco
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May 11, 1998: 3:39 p.m. ET
Move to spin off energy firm will begin with 20 percent offering later this year
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NEW YORK (CNNfn) - E. I. du Pont de Nemours & Co. said Monday it will spin off up to 20 percent of subsidiary Conoco Inc. in the first step of a planned divestiture of the entire energy firm.
While it wouldn't immediately provide a valuation, the company said it would be one of the largest initial public offerings ever.
Conoco currently has revenues of about $22 billion, representing nearly half DuPont's total revenues. With operations in 40 countries, Conoco is the nation's ninth largest petroleum company.
Wall Street -- which has called for the move for several years -- applauded the decision. News of the deal sent DuPont's stock (DD) up 6-3/8 at 80-7/16 in active trading on the New York Stock Exchange.
"It's a function of allowing each company to focus on the core areas," said Timothy Meyers, analyst at Equity Advisors.
The divestiture leaves Wilmington, Del.-based DuPont to concentrate on its other technology-intensive businesses such as the life sciences, which includes DuPont Merck Pharmaceutical Co., its seven-year-old joint venture with Merck & Co.
"A strong balanced portfolio is what's critical to Dupont - which includes many of our traditional business but more of a focus on our life sciences where we use our strength in 10 years of research in biotechnology coupled with our $3 billion of acquisitions last year," said DuPont President and Chief Executive Charles O. Holliday Jr.
Conoco's history
DuPont acquired Houston-based Conoco for $6.5 billion in 1981 -- the last time the international oil company was traded publicly. However, officials explained during a media conference call that Conoco is very different company today.
"I don't think we were ready for an IPO five years ago. We sold several billion dollars in assets. We really worked hard to position the company to be a premier performer," said Conoco President and Chief Executive Archie W. Dunham.
Conoco had an estimated value of $15.6 billion in 1996, according to John S. Herold Inc., a Stamford, Conn.-based energy research and consulting firm.
"We feel there will be premium of some measure in an IPO, particularly if oil prices are rebounding," said John Parry, consultant at John S. Herold.
Because of disclosure requirements, company officials weren't able to comment on the details of Conoco's financial statements or growth projections.
DuPont expects to file a registration statement with the Securities and Exchange Commission in the fall to complete the Conoco offering by the end of this year.
"Conoco has been a strong contributor to DuPont's earnings and cash flow for nearly 17 years," Holliday said
Dunham will be in charge of the independent company while Edgar S. Woolard Jr., retired chairman of DuPont, will serve as non-executive chairman.
DuPont said it intends to divest its remaining interest in Conoco "as soon as practical."
The divestiture could include further stock offerings or a spinoff to shareholders. A determination abpit the form and timing of such divestiture will be based on cash needs and market attractiveness.
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