Business Context and Reporting Period
This Form 8-K, filed on September 1, 2017, reports the completion of the merger of equals between E. I. du Pont de Nemours and Company (DuPont) and The Dow Chemical Company (Dow). Effective August 31, 2017, both companies became wholly-owned subsidiaries of a new holding company, DowDuPont Inc. Following the transaction, DuPont Common Stock was delisted from the New York Stock Exchange (NYSE), while DuPont Preferred Stock remains listed.
Key Financial Metrics
This filing is a current report regarding a corporate transaction and does not contain periodic financial statements. Consequently, specific metrics such as revenue, profit, cash flow, margins, debt, and liquidity for the reporting period are not provided in this document.
Material Changes
- Corporate Structure: DuPont and Dow are now subsidiaries of DowDuPont Inc.
- Stock Conversion: Each share of DuPont Common Stock was converted into the right to receive 1.2820 shares of DowDuPont Common Stock. Treasury shares were canceled for no consideration.
- Preferred Stock: DuPont Preferred Stock ($4.50 Series and $3.50 Series) remains issued and outstanding, unaffected by the merger.
- Equity Awards: Outstanding options and equity awards for both companies were automatically converted into DowDuPont equity awards with appropriate adjustments.
- Board Composition: The entire DuPont Board of Directors was replaced by Edward D. Breen and Nicholas C. Fanandakis immediately following the merger.
Guidance, Outlook, and Management Commentary
Executive Compensation: Edward D. Breen was appointed Chief Executive Officer of DowDuPont effective August 31, 2017, under a three-year employment agreement. His compensation includes an annual base salary of $1,930,800, a target annual cash bonus of 165% of base salary, and long-term incentive grants with a target fair value of $12,700,000. A 2017 long-term incentive grant of nonqualified stock options with a fair value of $1,600,000 was also awarded.
Transition Arrangements: Stacy L. Fox, Senior Vice President and General Counsel, entered into a transition agreement to serve as General Counsel and Secretary of DowDuPont on an at-will basis, retaining her current salary and incentive opportunities.
Future Transactions: Management indicated the establishment of a synergy incentive program to incentivize the contemplated intended business separation transactions and achieve anticipated synergies.
Risks and Contingencies: The filing notes that the summary of the Merger Agreement is qualified by the full agreement and that representations and warranties made during negotiations may not reflect the actual state of affairs at the time of the merger or thereafter.
Investor Verification Checklist
- Verify the conversion ratio of 1.2820 DowDuPont shares for each DuPont share held.
- Confirm the status of DuPont Preferred Stock, which remains listed on the NYSE.
- Review the full Merger Agreement (Exhibits 2.1 and 2.2) for detailed terms regarding the separation of the three future businesses.
- Check the new corporate governance structure under the DowDuPont holding company.
- Monitor future filings for the specific timeline and details of the intended business separation transactions.