Despite a few blockbuster transactions in recent years, DuPont CEO Ed Breen hasn’t finished reshuffling his company’s portfolio.
The firm has agreed to purchase the electronic materials specialist Rogers for $5.2 billion. DuPont also plans to divest one of its longest-held businesses, engineering polymers.
These moves advance the company’s “strategy to shift the portfolio towards higher growth and higher margin businesses while significantly enhancing the earnings stability of the company,” Breen said in a Nov. 2 conference call with analysts.
DuPont expects Rogers to have sales this year of about $950 million. The Arizona-based firm makes laminates for printed circuits and busbars that collect electricity in renewable energy devices. It also supplies polyurethane and silicone materials used in sealing and cushioning for electronics and other applications.
The Rogers acquisition will build on DuPont’s $2.3 billion purchase of the heat and electromagnetic shielding materials supplier Laird Performance Materials, completed in July.
DuPont sees synergies between these acquisitions and its existing electronic materials business. For smartphones, for example, DuPont already had materials for displays and semiconductor fabrication. Laird provides the shielding, and Rogers has the sealing technology.
The sale of DuPont’s engineering polymers business will finance the transaction. It has annual sales of about $4.2 billion and includes long-time DuPont products such as nylon, polybutylene terephthalate, and acetal polymers. Also for sale is the firm’s Tedlar surface protection films and its stake in the DuPont Teijin Films joint venture.
DuPont is holding onto materials like automotive adhesives. The firm’s Kevlar and Tyvek businesses are also not for sale.
“It’s going to sell,” Breen told analysts about the engineering polymer business, noting that he has already fielded inquiries. He said it is a “better asset” than the engineering polymers business that DSM put up for sale last month. He hopes to close a transaction by the end of 2022. Based on Breen’s statements, analysts at the investment firm Jefferies Group conclude the business could fetch $12 billion.
Earlier this year, DuPont, which split from DowDuPont in 2019, sold its nutrition and biosciences business to International Flavors & Fragrances, generating $7.3 billion in proceeds that it mostly used to pay down debt. Breen said DuPont may make other purchases it “has been studying for a few years.”
C. Stephen Tusa Jr., a stock analyst at J.P. Morgan, estimates that by the end of 2022, when the transactions will be complete, DuPont will have $7 billion in cash on its balance sheet, which the company will need to invest or distribute to shareholders. The “key here is the abundance of cash today earning nothing,” he wrote to clients.