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DuPont To Divest Automotive Coatings

Planned sale to private equity firm follows acquisitions in biobased materials

by Michael McCoy
September 3, 2012 | A version of this story appeared in Volume 90, Issue 36

Continuing to shift its portfolio away from its traditional businesses, DuPont has agreed to sell its performance coatings division to the Carlyle Group, a private equity firm, for $4.9 billion plus the assumption of $250 million in liabilities.

DuPont Performance Coatings is one of the world’s largest suppliers of auto and industrial coatings, with sales last year of $4.3 billion, about 13% of DuPont’s total. The business employs more than 11,000 people in 70 countries. Three-quarters of its sales are outside the U.S.

Yet in recent years, performance coatings has lagged behind other DuPont businesses in growth and profitability. Rumors began to circulate in late 2011 that CEO Ellen J. Kullman was shopping the business around. Given the highly consolidated nature of the auto coatings market, a financial firm was considered a more likely buyer than a competitor.

In a conference call with stock analysts to explain the deal, Kullman pointed to DuPont’s long-term compound annual growth rate targets of 7% for sales and 12% for earnings per share. She said DuPont businesses in agriculture and nutrition, biobased products, and advanced materials are better suited to meet those targets. DuPont has bolstered those businesses, she noted, with the 2011 purchase of Danisco for $6.3 billion and the recent takeover of the Solae food ingredient joint venture.

Don Carson, an analyst with Susquehanna Financial, asked Kullman on the call about the future of DuPont's performance materials business, its new lowest performer. Kullman responded that the business, which makes engineering and packaging polymers, is changing its portfolio of products by focusing on biotechnology. "I think they're doing great," she said.


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