WILMINGTON, Del. - DuPont Co.'s plan to divest its textile business for up to $5 billion may be delayed because the company is struggling to win support from shareholders in a Canadian business it first needs to acquire.
DuPont, the second-biggest U.S. chemical maker, set a deadline of midnight last night for its offer to buy the 24 percent of DuPont Canada it doesn't already own for C$21 ($15.24) a share. The company plans to merge the Canadian operations with its others before selling the DuPont Textiles & Interiors unit.
Len Racioppo, president of Jarislowsky Fraser & Co., which controls about 18 percent of the remaining shares, said he and other holders consider DuPont's bid too low. They're betting that DuPont's desire to sell or spin off the business that makes nylon and Lycra in one lot will give them leverage to force a higher offer. Potential bidders will probably stay away until the matter is settled, they said.
"We have received indications from about a half-dozen other large institutional shareholders who also said they are not tendering," said Racioppo, whose fund manages about C$36 billion ($26 billion) in assets, including 12 million DuPont Canada shares. "I don't expect that DuPont will be successful."
DuPont Canada has about 279 million shares outstanding, according to a regulatory filing. DuPont Co. owns some 213 million of them.
DuPont has been trying to get rid of the textiles unit since February 2002. Analysts consider Koch Industries Inc. a possible buyer, and DuPont has said it's in talks with an unidentified company. Now, DuPont is dependent on DuPont Canada shareholders.
Companies interested in buying DuPont's textile unit now don't know what operations it will contain. If DuPont takes over all of DuPont Canada, about 40 percent of the business will go with the textiles unit. If it's not successful, DuPont will put its whole 76 percent stake in DuPont Canada into the textile unit and no longer own part of the Canadian business that bears its name.
The difference means hundreds of millions of dollars for DuPont. To buy the rest of DuPont Canada, it's prepared to spend about $950 million, Chief Financial Officer Gary Pfeiffer said in late April. DuPont could then pick which pieces go with which operations.
The textiles unit would be worth as much as $2 billion more than current estimates if it included the 76 percent DuPont Canada stake, Sanford C. Bernstein analyst Graham Copley said in a report. The value of the remaining businesses at DuPont, the inventor and largest maker of nylon, would decrease correspondingly.
