Why the Dow-DuPont Merger is Bad For America

Dec 09, 2015

Unless you are an investment banker, it’s hard to feel good about the deal to merge Dow and DuPont, two storied American science companies with 330 years of history between them. The plan is to combine the two $60 billion companies and then break them apart again, creating three more “focused” companies in agriculture, materials science and specialty products.

My Fortune colleague Stephen Gandel says the deal “is about a slow-paced economy and fast-paced investors.” DuPont (dd) was hounded by activist Nelson Peltz, whose bid for influence was defeated by CEO Ellen Kullman. But he held his shares and she lost her job. Dow’s (dow) Andrew Liveris has fared better, but he has activist Daniel Loeb nipping at his heels. Perhaps shareholders will make money from this massive act of corporate engineering – both stocks rose modestly after the announcement – but the end result is sure to be fewer employees and shrinking research budgets. Pardon me for sounding Trumpian, but it’s hard to believe the folks at Sinochem aren’t cheering.

My friend Dennis Berman at The Wall Street Journal calls the merger/breakup “The Shrinking of American Ambition.” (subscription required.) At BreakingViews, Kevin Allison says it will be this generation’s “Barbarians at the Gates.”

As mentioned yesterday, U.S. antitrust cops are feeling their oats these days, and may try to axe this deal. But that won’t solve the basic problem: old-line American companies are facing demands from yield-starved investors which they can’t satisfy with organic growth.

Before descending too deep into declinism, however, it’s good to remember there’s always Silicon Valley. I met yesterday with Scott Dietzen of Pure Storage, whose company makes the flash storage that is helping to power the corporate data revolution and recently reported sales growth of over 167% a year.

Dietzen took Pure Storage public last year, and is happy about it. “We believe in the public company model,” he says. “Most of our customers are public companies.” And he believes his company has a huge (oops, hearing Trump again) opportunity in the tech transformation of business, which he believes is just beginning.

“We are in the first inning of taking the learnings from the Google, Facebook and Apple era in the consumer market and applying those learnings to enterprise tech,” Dietzen told me.

So the revolution stumbles on.

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