DowDuPont gets ready to spin off Dow

DowDuPont, the company formed a year ago through the historic merger of the two chemical giants, has taken a first step toward its planned breakup into three separate firms.

DowDuPont filed a Form 10 Registration Statement with the U.S. Securities & Exchange Commission to start the process of separating its materials science division into one of those firms, being called Dow Holdings. The filing includes a strategy overview, end-market information, and financial data about the new Dow.

DowDuPont expects to complete the process by April 1, 2019. Separation of the other two companies—a new DuPont and an agriculture company called Corteva—will follow.

As previously disclosed, the new Dow will bear some resemblance to the old Dow. Major changes are the folding of Dow’s agriculture business into Corteva and the transfer of Dow businesses in areas such as electronics, specialty silicones, food ingredients, and automotive materials into the new DuPont.

Dow will hold on to the bulk of its silicones business, and to bolster this area the company just announced a series of investments. Dow will expand its siloxane facilities around the world; build a specialty resin plant in Zhangjiagang, China; and build a hydroxyl functional siloxane polymer plant in Carrollton, Ky. The firm will also study the construction of a new, world-scale siloxane plant.

Long in coming, the Dow spin-off isn’t a surprise to company watchers. Still, the Form 10 held some reassuring tidbits for financial analysts. In a note to clients, David Begleiter, a research analyst at Deutsche Bank, said he is cheered to see that Dow recommitted to “disciplined capital allocation,” since “the old Dow was perceived by many investors as a poor allocator of capital with a penchant for large, capital-intensive projects.”