Shareholders of E.I. du Pont de Nemours & Co. today gave overwhelming approval to the chemical company's acquisition of Conoco Inc. in what is by far the most expensive corporate merger in history.
Except for some badgering from professional stockholders, the meeting was a surprisingly easy one for new Du Pont Chairman Edward G. Jefferson, whose first major move as the head of Du Pont was to launch the company on a $7.3 billion takeover battle for the nation's ninth-biggest oil company.
Jefferson told shareholders that Du Pont had acquired a company whose assets were worth roughly twice what the chemical company had to pay for them.
Du Pont's quest to buy Conoco came after Seagram Co., the Canadian-based distiller, launched an unfriendly bid in late June to get control of Conoco. Conoco Chairman Ralph Bailey then turned to Du Pont and Jefferson for a friendly takeover.
Mobil Corp., the nation's second-biggest oil company, later made an offer for Conoco as well. The bidding for Conoco escalated throughout July. Mobil's bid, at $8.8 billion, was the richest, but never attracted much investor support because of fear of potential antitrust problems.
Seagram, whose first bid was $73 a share, eventually paid $92 for each of about 28 million shares of Conoco.
Du Pont ended up paying $98 apiece for 38.7 million Conoco shares (about 45 percent of the shares being traded publicly) and will exchange 1.7 shares of Du Pont for each of the remaining 48.1 million Conoco shares in public hands. Du Pont also bought 15.9 million shares from the Conoco treasury at $87.50 each.
As a result of the takeover, Seagram will become the largest shareholder in Du Pont after it exchanges its 28 million Conoco shares for 47.6 million Du Pont shares.
Jefferson told reporters following the annual meeting that Seagram and Du Pont officials have not talked, but if one company owned 20 percent of another as Seagram does of Du Pont, it is "reasonable to suppose that you'd have some representation" on that company's board of directors.
Seagram Chairman Edgar Bronfman has not said whether the Canadian distiller will seek representation on Du Pont's board or whether Seagram will try to swap its Du Pont holdings for some assets of the combined Du Pont-Conoco.
Conoco Chairman Ralph E. Bailey said it is "utter nonsense" to suggest that Du Pont would exchange Conoco's coal holdings for Seagram's Du Pont stock. Conoco is not only the ninth-biggest oil company, it is the nation's second-largest coal concern. Jefferson told shareholders today that Du Pont does not intend to sell any coal holdings.
He said that during the coming years coal will become more important to chemical companies because of the rapidly rising price of oil.
About 115.5 million Du Pont shares were voted in favor of the merger, while 7.5 million were voted against it. Nearly 33 million shares, or 21 percent of the outstanding Du Pont stock, was not voted at the special shareholders meeting.
What shareholders approved today was an increase in the authorized number of Du Pont shares to 300 million to enable the chemical giant to issue nearly 82.8 million shares of its stock to Conoco owners who did not want, or did not qualify for, the cash portion of Du Pont's offer.
Du Pont went deeply into debt to buy Conoco, borrowing almost $4 billion from its bankers. Jefferson said a high priority of the company will be to repay that debt.