Name: The Implications of a Dupont-Dow Chemical Merger
Uploaded: 2015-12-11
Duration: 3 min 40 s
Description: Fortune’s Aaron Task and Stephen Gandel discuss.

[ MUSIC ] Steve, you, just in the past couple hours, actually spoke to the CEOs of both companies, Andrew Liverist, and Ed Breen. What did they have to say? Well, what they had to say, it's a little predictable. What they had to say was that this deal was not driven by activist investors. [ CROSSTALK ] It wasn't driven, right. By the pressure of the market. It wasn't driven by the slowness of the economy. It was driven by the fact that they think if they put these big firms together, then break them up into separate parts, the firms would be more productive. They have businesses that when they fit together There'll be higher growth, that's what they said, but it's hard to believe that, right? Because Liveris had approached Kullman before she left. Ellen Kullman, the former CEO. Ellen Kullman, the former CEO that was pushed out by an activist investor On that Dupont side, right? He had approached her, she was not interested and when she got pushed out, right? Which was definitely a part of his activist. That's when this deal was heated on. But Aaron, I know the market received it okay, but it's been roundly panned by the media and the press and other people too, I mean Allen Murray, our boss wrote that It's very hard to get excited about this deal or feel good about this deal unless you're an investment banker so why all the criticism? Right well if our boss says that then I agree, right? [ LAUGH ] Of course. And I think he's right in this case, these are two great iconic American companies and they're getting together and it does feel like it's all about financial engineering and because there isn't a lot of organic growth and they're just gonna try to do it through synergies which is A synonym for cost cutting, and they're gonna cut a lot of jobs. And maybe they will generate a couple more earnings per share out of this, but is that ultimately long term good for the American economy, cuz you have more people out of work. And ultimately, I know that Steven asked about this, I think less R and D spending out of these two giants, which have made huge advances in science. And that's a big part of it. I mean, Dupont's research lab is famous. Think of all the things it's given us. The brand names. Kevlar, Lycra, Teflon. You have written Steve, that this might be the beginning of a new normal and a reduction in that across the board. Is that right? Companies have been taking down their scientific spending. Not necessarily their RND spending but the amount of spending they do on basic research that gets new patents. Companies have been doing less of that. And when I asked about what's gonna happen to DuPont's storied X Center it's called where the invented Kevlar and all the other things, and they said it was a KG answer. It wasn't really. They said that that's not where our R and D is any more. Our R and D is in the businesses. Not in that storied central lab. I would bet if you looked at the total R & D for those two companies, today, and then, three years from now or two years from now, you go back and check, it's gonna be less. It'll be split into three different companies and the aggregate will be less than it is today, I can almost guarantee that. So, do you think that there's, I mean, the Wall Street Journal called this the end of American ambition. Is this overstating things, or do you think there's something to this? Steve. There's something to the fact that, listen, Coleman was built on, her whole idea was that DuPont was gonna be a company that makes life better for the world, right? And they were gonna use of all these different things, the agriculture business and the plastics business and the safety materials business These things were gonna combine together to make a better world. And instead when these companies are broken up, you know, we may still have a better world, but it's not gonna be, it's gonna be one company working on one thing and one company working on another thing. There's no global vision. There's no huge company that's gonna have a global vision for how to make. The future. And I think that we lose that when we break these company's [ UNKNOWN ]. We do have a lot of innovation happening out in Silicon Valley of course. Yes. Well, that's what I was just thinking with [ UNKNOWN ] was just saying, we have those companies who wanna make the world, quote unquote, a better place, and their tech companies. Right? Apple's not gonna break itself up. Google Google certainly wants to do everything. Facebook wants to be all things to all people. But it's a different type of innovation than what we've come to expect from the Dow chemicals of the world. [ MUSIC ]

Fortune’s Aaron Task and Stephen Gandel discuss.