DuPont’s big breakup could be second-time lucky
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, May 23 (Reuters Breakingviews) -How big should a company be? For DuPont de Nemours DD.N boss Ed Breen, the real question is: how small? DuPont is about to break up into three companies, separating out its water and electronics units from the business that makes industrial materials such as Kevlar. Over the years, DuPont has grown, shrunk, bought and sold, and produced precious little value for shareholders in the process. This time might actually be different.
The backstory is dizzying. The old DuPont merged with Dow in a $130 billion megadeal in 2017. Both had built up a mish-mash of businesses over more than a century, from electronics to food additives. The new company then remixed itself and broke into three smaller industrials firms – DuPont, Dow and Corteva CTVA.N. At one point, DuPont swapped a food business for a stake in listed International Flavors & Fragrances IFF.N. Breen stepped down, then came back. Investors have little to show for all of this: the various parts of former DowDuPont are collectively worth $127 billion, less than when they were one company.
The new breakup plan might actually achieve what years of financial engineering previously didn’t, and create parts that trade at higher valuations by attracting more specialized investors. Take electronics: Entegris ENTG.O, a rival to DuPont’s electronics business, trades at nearly double DuPont’s multiple of EBITDA, according to Visible Alpha. It’s a similar story for Xylem XYL.N, which goes up against DuPont in water purification and treatment. Assume DuPont’s units trade in line with those competitors, and the collective’s enterprise value could increase by over $15 billion, Breakingviews calculates.
Smaller could still lead to bigger. Breen has over the years tried sloughing off aging businesses to raise cash he can divert into racier ones, sometimes at value-destructive prices. After the split, his successors will at least run more focused companies with equity they can use as a currency for future mergers. Better yet, if they do trade at better multiples, thanks to current manias for artificial intelligence and green industrial renewal, future deals will be less painful. After years of tortuous tinkering, Breen’s new scheme looks like the right one.
Follow @JMAGuilford on X
CONTEXT NEWS
Chemical and materials company DuPont de Nemours said on May 22 that it would split into three publicly-traded companies. The two new standalone businesses will comprise its electronics and water portfolios respectively. The remaining company, dubbed New DuPont, will be focused on healthcare, automotive, and safety and protection products. The split will not constitute a taxable event for shareholders, the company said.
DuPont’s predecessor company merged with chemicals peer Dow in 2017. It subsequently split into three companies, leaving today’s DuPont, as well as Dow and Corteva Agriscience, in 2019. DuPont has since engaged in a series of transactions, including merging its nutrition business with International Flavors & Fragrances in 2021 and selling the majority of a unit known as Mobility & Materials to Celanese in 2022.
Alongside the transaction, DuPont said Chief Executive Ed Breen will step down. He will remain executive chairman. Breen led DuPont through its merger with Dow, stepping down following the prior split in 2019, before resuming the role in 2020.
DuPont's previous financial tinkering created little value DuPont's previous financial tinkering created little value https://reut.rs/3yuwZGG
Editing by John Foley and Pranav Kiran
免責聲明: XM Group提供線上交易平台的登入和執行服務，允許個人查看和/或使用網站所提供的內容，但不進行任何更改或擴展其服務和訪問權限，並受以下條款與條例約束：（i）條款與條例；（ii）風險提示；（iii）完全免責聲明。網站內部所提供的所有資訊，僅限於一般資訊用途。請注意，我們所有的線上交易平台內容並不構成，也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。
所有缐上交易平台所發佈的資料，僅適用於教育/資訊類用途，不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議，或是交易價格紀錄，或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。
本網站的所有XM和第三方所提供的内容，包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接，皆爲‘按原狀’，並作爲一般市場評論所提供，而非投資建議。請理解和接受，所有被歸類為投資研究範圍的相關内容，並非爲了促進投資研究獨立性，而根據法律要求所編寫，而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊，相關詳情請點擊 這裡查看。
