DuPont Will Split In Two

Three months after stating that it might get rid of its giant performance chemicals business, DuPont got specific, saying it plans to turn the unit into a separate, publicly traded company by spinning it off to shareholders. The new firm would be the 11th-largest U.S. chemical firm, according to C&EN’s ranking of 2012 sales (C&EN, May 13, page 26).

Creation of the yet-to-be-named firm, which today has annual sales of $7.2 billion and 7,000 employees, should be complete by April 2015. It will make products such as Suva refrigerants, Teflon nonstick coatings, and titanium dioxide paint pigments.

DuPont said it might exit the business, which had $1.8 billion in earnings last year, to focus on faster-growing and less cyclical operations.

“DuPont’s mission will continue to be science-driven growth. DuPont’s performance chemicals mission will be cash generation,” CEO Ellen J. Kullman says. “After separation, DuPont will have the optimum portfolio and will benefit from more consistent earnings growth and lower volatility.”

After the spin-off, DuPont will have $28 billion in sales and retain the number three slot in C&EN’s ranking, after Dow Chemical and ExxonMobil. Agriculture will be its largest business at about 37% of sales.

DuPont announced the move on Oct. 24, just after a board of directors meeting, says Nicholas C. Fanandakis, DuPont’s CFO. Two days earlier, in its third-quarter earnings report, the firm disclosed a 38% decline in performance chemicals earnings compared with a year ago.

Analysts have speculated that activist investor Nelson Peltz, whose Trian Fund Management recently took a stake in DuPont, pushed the firm to toss performance chemicals to focus on its faster-growing agriculture, industrial biotech, performance materials, and protective materials businesses. But Fanandakis says the company has been evaluating the exit for the past year.

DuPont’s decision is “a game changer,” according to Deutsche Bank analyst David Begleiter. Because earnings from titanium dioxide are highly cyclical, Wall Street has discounted DuPont shares, he writes in an investment note. After the split, DuPont’s share will “trade up” to the higher valuations typical of crop protection businesses, Begleiter predicts.