Talk about drama. The SEC initiated an investigation into whether or not a senior executive and a board member at Dow Chemical (DOW), both of whom have been fired by the company, secretly attempted to put the company in play, the New York Times reported today. The investigation might also probe Dow's attempt last autumn to buy DuPont (DD)in a deal worth over $40 billion. At the time, neither company disclosed that Dow had approached DuPont. DuPont turned Dow down, but its stock rose 15% between September and December. The SEC is also examining the unusual trading that resulted from their actions in both companies stocks. Another question that will need to be answered is who at JP Morgan let the "cat out of the bag" to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard since it appears JP Morgan was working both deals simultaneously?
Dow says the speculation, and the accompanying stock price spikes, were fueled by the actions of Romeo Kreinberg and J. Pedro Reinhard, who held "multiple meetings" about a takeover. JPMorgan Chase, who was working on the unauthorized takeover proposal of Dow, admits it met with both men. Both executives deny the accusations and have countersued Dow for defamation. Another question that will need to be answered is who at JP Morgan let the "cat out of the bag" to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard?
The SEC probe and the lawsuits will hinge on testimony from JPMorgan CEO James Dimon, who told Liveris that Kreinberg and Reinhard had held talks with JP Morgan about a Dow takeover. It would be hard to imaging nobody at JP doing anything wrong after looking at the activity of both companies stocks, so Dimon will essentially have to throw some of his folks to the wolves.
The really big news here is the attempted Dow and DuPont merger. This story is going to have a ton of twists and turns to it in the coming months and ought to keep us occupied in an other wise slow summer. Dow has long coveted Dupont's seed business an the offer was an attempt to get it. Since that seems to have failed could a Monsanto (MON) joint venture be coming? It would be a way for Dow to get heavily into the seed business and provide Monsanto cheaper building blocks for its products and cash to reinvest in it's business as it has stated it wants to.
Stay tuned to this one