The last time Michigan got sold a “Merger of Equals” it didn’t work out so well.
Now Midland-based Dow Chemical Co. and rival DuPont Co. are proposing a fusion that would create the world’s second-largest chemicals behemoth — before splitting into separate agriculture, material sciences and specialty products companies over the next two years.
Good news? The spin says that it is, with Dow Vice Chairman Jim Fitterling telling the Midland Daily News the chemical maker has “always been here and we’re committed to the community. So there shouldn’t be any questions on anybody’s minds about our commitment to be here.”
Not so fast. There should be questions because intent and what actually happens after deals like these close can be two very different things. The history of corporate Michigan the past 20 years is littered with grand entrepreneurial names that no longer exist as corporate entities here: Gerber and Upjohn, Kmart and too many banks to count.
More, the state has a decidedly mixed record of too often being on the losing end of corporate evolutions with meaningful implications for its employee base and reputation as a home for corporate winners. Cases in point: Comerica Inc. decamps headquarters to Dallas to better position itself for mergers that never happened; and Volkswagen of America bolts for suburban Washington because it can.
Intentionally or not, the Dow-DuPont language is eerily reminiscent of the “it’s all good” talking points foisted on Detroit by the alleged “Merger of Equals” marrying Germany’s Daimler-Benz AG with Auburn Hills-based Chrysler Corp. That turned out to be neither a merger nor one of equals in a transatlantic deal gone bust.
Whether the Dow-DuPont tie-up proves to be different will depend on a lot of variables that could make this proposed deal look a lot different by, say, 2018. The biggest variable: the honesty of the executives and corporate directors who engineered the deal under relentless pressure from activist shareholders.
Before the weekend news cycle stopped whirring, activist investor Daniel Loeb expressed support for the proposed combination but called for the ouster of Dow CEO Andrew Liveris, eliciting swift counter-punches from Dow directors in on-the-record interviews with The Wall Street Journal. If nothing else, the flurry underscores a contentious back-story to the deal, evidence that there’s always something more to them than the corporate line.
If this town, this state, learned anything from the failed DaimlerChrysler deal it should be the vital importance of matching corporate rhetoric to corporate action. The Germans who sold Detroit on the merger of equals later acknowledged the deal to be an acquisition, explaining the exodus of Chrysler talent from the all-important management board and other top executive jobs.
It was a lie. There was nothing equal about the union, notwithstanding generalized numbers wielded to pacify Americans and Chrysler’s hometown on the losing end of the deal. The Dow-DuPont dealmakers are responsible to show the intent of their transaction is more than selling it short-term to a nervous mid-Michigan accustomed to Dow being their immutable corporate bulwark.
Whatever anxiety lurks, a chorus of positivity is greeting the Dow-DuPont tieup. From Gov. Rick Snyder and Midland Mayor Maureen Donker to Timothy Nash, a Northwood University economics professor, the deal represents opportunity and growth to Dow’s 6,000 employees across the state and its hometown.
Hopefully so. But the logic of mergers rarely permits the status quo to survive — the jobs and the facilities, the commitments to home town and legacies diluted by time, actuarial tables and the pitiless global marketplace. DowDuPont is likely to be no different; the only question is to what extent it will be.
Despite seismic change wrought by bankruptcies, the Great Recession and the global financial meltdown, Michigan remains a company-town state. General Motors Co. in Detroit; Ford Motor Co. in Dearborn; the Office Furniture Three in west Michigan; Kellogg Co. in Battle Creek; La-Z-Boy in Monroe; Amway and Meijer near Grand Rapids.
The common denominators are business, competition and shareholders. Some of them are private and patient, the scions of the founding entrepreneurs with names like DeVos and Meijer. Others are public and not so patient, witness Dow’s drama with Loeb and DuPont’s with activist investor Nelson Peltz.
None of it is immune to change. Nor is the angst that comes with it, whatever calm reassurances come from the top telling people what they desperately want to hear.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.