DuPont will sell the majority of its 600-employee Stine-Haskell Research Center in Newark to Philadelphia-based FMC Corp. as part of a multibillion-dollar asset swap.
The Wilmington-based company also announced it has pushed back the expected closure date of its proposed $130 billion merger with the Dow Chemical Co. DuPont now expects the deal to be completed between Aug. 1 and Sept. 1. Originally, Dow and DuPont said the merger would be finalized in the first half of 2017.
FMC will acquire the 515-acre facility’s agriculture research space, known as the Stine portion. DuPont, however, will retain the plant’s Haskell side, which houses product and toxicology testing laboratories. The Haskell side will likely be transferred to one of the three spinoffs that will be created after DuPont completes the Dow merger.
FMC’s chief executive officer, Pierre Bondreau, told The News Journal it intends to retain all Stine-Haskell employees and will add workers.
“We absolutely do not intend any reductions in staffing,” he said. “In fact, we expect to keep upgrading. People should not have any fear or questions about our strong commitment to our population working there.”
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Stine-Haskell will become FMC’s major research hub. Currently, FMC’s chief research center is in Ewing, New Jersey.
“We intend to completely leverage Stine-Haskell with our own R&D organization in New Jersey,” Bondreau said. “Stine-Haskell is going to become the global R&D center for FMC and our primary discovery center.”
Once the Dow and DuPont merger is complete, the Haskell portion will become the global hub for the combined company’s testing operations, said James C. Collins Jr., executive vice president of DuPont. Collins said upgrades are planned for the Haskell space, but it is too early to provide specifics.
About 50 employees work on the Haskell side.
“We’ve always known that we needed to retain the Haskell laboratories,” he said. “We need to increase the capacity of that facility to handle the amount of business it will be getting. Our intention is to make some investments going forward.”
Some in Delaware feared Stine-Haskell would face cuts. In March 2016, DuPont relocated researchers affiliated with its hybrid seed unit, Pioneer, from Stine-Haskell to Pioneer’s headquarters in Johnston, Iowa. The move was part of a series of cost-cutting moves Breen initiated when he replaced former CEO Ellen Kullman in 2015. Breen also eliminated 1,700 Delaware jobs, including 200 in DuPont’s Central Research and Development division at its other major research hub, the Experimental Station.
Rich Heffron, president of the Delaware State Chamber of Commerce, said FMC’s purchase of Stine-Haskell was “very important” for Delaware.
“We’ve gone from ‘They are going to close Stine-Haskell’ to ‘They are going to divest Stine-Haskell, and the jobs will stay here,’” he said. “That’s better news than we expected two years ago.”
U.S. Sen. Chris Coons, D-Del., called the deal “great news” for Delaware.
“There is a tremendous amount of potential growth from FMC as they continue to a much stronger competitor in the agriculture industry,” he said.
U.S. Sen. Tom Carper said the deal is good for Delaware because FMC’s nutrition business will bolster the specialty products company that will be spun out of the combined Dow and DuPont. The specialty products company will be one of two spinoffs that will be headquartered in Delaware. A third, material sciences, will be based in Dow’s hometown of Midland, Michigan.
“Delaware wins in two ways,” Carper said of the swap.
FMC picked up the Stine laboratories as part of an asset trade between the businesses. DuPont will sell part of its crop protection unit to FMC and acquire nearly all of FMC’s health and nutrition business. FMC also will pay about $1.6 billion in cash to DuPont because of the difference in the value of the assets.
Under the agreement, FMC will buy DuPont’s Cereal Broadleaf Herbicides and Chewing Insecticides portfolio, including Rynaxypyr, Cyazypr and Indoxacarb. It will also get DuPont’s crop protection research and development pipeline with the exception of seed treatment, nematicides and late-stage research program. The assets being divested generated about $1.4 billion in revenue last year, according to DuPont’s regulatory filings.
Rynaxypyr was viewed as a potential jewel of DuPont’s insecticide portfolio. A relative newcomer to the market, DuPont expected the product to generate more than $1.5 billion in sales. Collins said DuPont’s agriculture portfolio remains strong and will get a boost from Dow’s pipeline.
“We continue to be excited about our agriculture lineup,” he said.
DuPont, meanwhile, will acquire FMC’s $700 million Health & Nutrition business. The unit’s key products are food ingredients and pharmaceutical excipients, a substance that helps improve medicines’ long-term effectiveness.
Mark Gulley, a principal of New York-based chemicals and agriculture consultancy Gulley & Associates, called the deal “very good” for FMC.
“FMC was a strong candidate for this pipeline because of the geographic connection,” he said. “There is a strong alumni club that worked at both organizations. There is a familiarity because of that.”
The agriculture industry has been rocked by multiple proposed mergers. In addition to Dow and DuPont, ChemChina and Syngenta as well as Bayer and Monsanto have agreed to merge. If all three deals get approved, it would take the agriculture market’s so-called “big six” and reduce it to the “big four,” including BASF. Bondreau said with the DuPont crop protection acquisition, FMC will become a major industry player.
“If you think about what is happening now in the agriculture industry, there are some formidable, competitors being created,” he said. “For us, we needed to do something, and this a way to be part of a ‘big five.’”
FMC operates a Health & Nutrition facility along Ogletown Road in Newark, employing about 100 people. That plant will be transferred to DuPont, although it is not clear what the company’s immediate plans are for the facility.
DuPont needed to divest the agriculture assets to win European Union approval for the Dow merger. On Monday, the EU’s chief antitrust regulatory agency green-lighted the deal upon the condition of both companies selling off certain products lines. Dow agreed to part with its acid copolymers and ionomers business.
The EU had been skeptical of the deal, worrying that it would stifle competition and reduce innovation in the agriculture sector. Margrethe Vestager, chair of the European Commission, the European Union’s antitrust authority, said in a Monday statement the divestitures were necessary to ensure the merger “does not reduce price competition for existing pesticides for innovation of safer and better products in the future.”
Other countries, including the United States, Brazil, Canada and China are reviewing the merger. It is not known when those jurisdictions could render a verdict on the deal. Breen said DuPont is “very deep into the conversation” with U.S. regulators.
“I would expect the process to move rather rapidly now,” he told The News Journal. “Our agriculture remedy was a global one; it was not specific to Europe.”
Breen said more divestitures could occur, but nothing that would have a major impact on DuPont.
“I think you’ll see some minor things in specific countries, but this was the big package,” he said.
DuPont’s stock price dropped about 1.6 percent at the close of trading on Friday, while FMC’s stock jumped more than 8 percent. Gulley said the diverging stock prices reflect the market’s opinion that FMC got a good deal.
“The market is making a downpayment on the earnings it expects from the two businesses,” he said.
DuPont stock closed at $80.33 per share, a slight drop from the $81.40 per share at the start of trading. FMC, meanwhile, closed at nearly $70 per share, up from Thursday’s closing price of $61.48 per share.
Credit: - Jeff Mordock, The News Journal, WIlmington
March 31, 2017