NEWS OF THE WEEK
DUPONT $8.8 BILLION BUYBACK Seagram parts with 156 million shares n a transaction valued at about $8.8 billion in cash and notes, DuPont has repurchased nearly all of the 24% stake in the company held by Seagram. DuPont will sell off some assets to help finance the deal. Seagram parted with 156 million shares of common stock but retains 8.2 million shares, a 1.2% stake. Four Seagram executives who have been serving on DuPont's board have resigned and will not be replaced. The maker of distilled spirits, wines, and juices acquired its interest in DuPont 14 years ago—valued then at about $3 billion—after a bidding war for Conoco. Conoco eventually became DuPont's petroleum subsidiary, but DuPont had to exchange its shares for Seagram's interest in Conoco. Seagram wanted to withdraw and redeploy almost all of its DuPont assets, notes Edgar S. Woolard Jr., chairman and chief executive officer of DuPont. This "allowed us to negotiate an arrangement whereby we were able to acquire the shares below the closing market price"—more than $64 on April 6, the day the deal was struck. The chemicals giant paid about $53 per share in cash and notes and $3.00 per share in warrants. Seagram received $1 billion in cash, $7.3 billion in short-term DuPont notes, and warrants valued at $440 million. The warrants would allow Seagram to eventually replicate its entire position in DuPont, but at a cost of about $16 billion, which probably would be prohibitive. The notes carry a market rate of interest and are redeemable by DuPont at any time without penalty. There also are limits on Seagram's selling the warrants to a third party. DuPont says permanent funding for the transaction will include about $5 billion from operating cash flow and selective asset sales, about $1 billion from a Flexitrust program that uses DuPont shares to finance existing employee benefit programs, and about $2.5 billion
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been up for sale. Only within the past six to nine months has the company taken it off the block, reasoning that its earnings cover the cost of capital, Raman says. But he adds, "We believe that financial buyers will be attracted to this business, as costs have been reduced and profits are beginning to improve." DuPont says the repurchase—which reduces its outstanding shares but increases its interest expense by about $150 million—will immediately add to earnings per share, raising them about 10% annually over the next one to two years. Raman agrees: "This move is a good one, and the stock will approach $70 within 12 months." Woolard describes the deal as a "once-in-a-lifetime opportunity" and a "tremendous benefit" to all shareholders. "We believe our shares have been undervalued in the marketplace, so we've been contemplating a share purchase for some time," he notes. "Redeeming Seagram's shares is the best use of our financial resources today." DuPont says it is committed to reWoolard: once-in-a-lifetime opportunity storing its financial flexibility and expects its debt-to-total-capitalization rafrom equity offerings. The net result will tio to return to the target range of 35 to be a reduction of about 15 to 17% in Du- 40% by the end of 1996. Since mid1993, DuPont has reduced its borrowPont's outstanding shares. "We're in the process of thoroughly ings by more than $4 billion, the comevaluating the competitive position of pany notes. all of our businesses right now and it Indeed, it was not lack of confidence will be several weeks before we make in DuPont's future that prompted Seaany decisions," says Woolard. "Our ex- gram to sell most of its shares. "The pectation is that something in the $2 DuPont investment has been a good billion range of asset sales will take one for Seagram shareholders," stresscare of [the firm's] cash needs." es Seagram President and CEO Edgar Paul K. Raman, a vice president and Bronfman Jr. "We consider DuPont a analyst with the New York City-based strong and very well managed compainvestment firm of S. G. Warburg & ny that continues to have attractive upCo., speculates that DuPont's diversi- side potential." fied businesses and Conoco are the Bronfman adds that "A combination most likely to go because they generate of unique circumstances has created an the lowest return on assets. And within opportunity for Seagram to realize a the diversified businesses, he notes, substantial gain on our DuPont invest"the most obvious candidate is the im- ment, while achieving greater flexibiliaging business." ty to pursue alternative investment DuPont's imaging business has long strategies to maximize shareholder val-
ue." Seagram is expected to account for the transaction as an investment dividend rather than a capital gain, giving it far more favorable tax treatment. Seagram will use a portion of the proceeds to repay debt and the rest for other corporate purposes, including acquisitions and share purchases. Three days after cutting the deal with DuPont, Seagram agreed to buy an 80% interest in entertainment giant MCA Inc. for $5.7 billion in cash. Overall, the move is positive for DuPont. Says Raman: "We believe that this event will be a milestone in DuPont history [and] will be a catalyst for future change for the company and its shareholders." Susan Ainsworth and Ann Thayer
Results of climate conference draw fire Few participants came away fully satisfied from an 11-day United Nations (UN) conference on climate change held in Berlin, called to consider alterations to the UN Framework Convention on Climate Change. Environmental groups had hoped for more than just the conference's mandate to launch two years of negotiations on tightening controls on greenhouse gases. And industry representatives had lobbied against any change in the existing pact without concessions from developing nations. Signed at the Rio de Janeiro Earth Summit in 1992, the treaty calls for industrialized countries to try to reduce their greenhouse gas emissions to 1990 levels by the year 2000. The Berlin meeting was the first chance for the 121 ratifying nations to modify the pact since it went into force in March 1994. "Only substantial emissions reductions below 1990 levels can put us on a course to stabilize the climate," contends Daniel A. Lashof, senior scientist at the Natural Resources Defense Council. "We had expected such an agreement to be finalized in Berlin." That didn't happen. After little substantive progress the first week, the delegates agreed to declare the treaty's current commitments "not adequate" to protect Earth's climate. And they decided by consensus to begin negotiation of a protocol requiring specific reductions in green-
house gases after 2000. Negotiations are to conclude by 1997. The U.S. delegation argued for such a negotiation mandate, which carefully avoids spelling out in advance what exact targets and timetables might ultimately be required. The U.S. also pushed successfully for coverage of all greenhouse gases—not just carbon dioxide— in any future protocol. But the U.S. was unable to prevail on another key objective: to require developing countries to begin addressing their rapidly rising emissions. This failure of developing nations to take responsible action undercuts the treaty, contends the Global Climate Coalition—a group representing coal and petroleum firms and energy-intensive companies, including some major chemical firms. Sen. Frank H. Murkowski (R-Alaska), chairman of the Senate Energy & Natural Resources Committee, says the Clinton Administration agreed to a bad deal. "We agreed to a process where China and South Korea, significant
trading partners of ours, will participate in a negotiation to set new UN mandates for greenhouse gas reductions that are binding on us, but not on them, and that's crazy." Developing nations respond by citing the industrialized nations' failure to achieve their own modest cutbacks. "Developed countries seem to be welshing on their commitment in Rio to cut back to 1990 levels by 2000," notes Annie Petsonk, international counsel with the Environmental Defense Fund. "The reaction of developing countries is to say: We're not going to commit to reductions until you've met your commitments.' " Conference delegates also agreed to begin a trial of joint implementation, in which wealthier countries finance emission reductions in poorer nations. Industrialized nations will not be able to claim credits to offset their own emissions during a pilot phase—to end no later than 1999. But they might be able to claim such an offset later if the trial is deemed successful. Pamela Zurer
Approach to nanoscale catalysis developed Creating a nanotechnology—one with dimensions measured in nanometers— will require "nanomanufacturing" techniques. Scientists at the University of California, Berkeley, have moved toward such a capability by carrying out highly localized chemical catalysis to create high-resolution structures on a surface. "By varying the nature of the catalyst and the chemical composition of the surface, it may be possible to synthesize molecular assemblies not readily produced by existing microfabrication techniques," the researchers reported in last week's issue of Science [268, 272 (1995)]. The Berkeley team, led by chemistry professor Peter G. Schultz and physics professor Paul L. McEuen, combined atomic force microscopy (AFM) and molecular self-assembly in their approach to nanoscale catalysis. Both techniques have been used previously—but separate ly—in the fabrication of nanostructures. But the Berkeley scientists introduced a significant new wrinkle by coating the AFM tip with platinum. Researchers previously used AFM tips to position atoms and molecules on a surface. The Berkeley team uses the platinum-coated AFM tip as a precision catalysis device.
K. Eric Drexler of the Institute of Molecular Manufacturing, Palo Alto, Calif., calls the paper "fascinating." He points out that a conceptual problem in nanoscale chemistry is localizing reagents to particular sites on a surface. But the cata-
Schultz: do chemistry on a nanoscale APRIL 17,1995 C&EN 7
