DuPont de Nemours (DD) is making headlines Thursday after the global chemicals company announced its intention to split into three independent, publicly traded companies.
Over the next 18 to 24 months, DuPont will separate its Electronics and Water businesses from its core business. New DuPont will continue operating as a diversified industrial company while the new independent entities will "benefit from increased focus and agility in their respective industries," DuPont said in a press release announcing its spinoff plans. All three companies will have "strong balance sheets, attractive financial profiles and compelling growth opportunities," it added.
"This is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the creation of three strong, industry-leading companies," DuPont CEO Ed Breen said in a statement.
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In addition to creating shareholder value, the separation will create new opportunities for employees, DuPont explained. "Critically, each company will have greater flexibility to pursue their own focused growth strategies, including portfolio enhancing M&A [mergers and acquisitions," the firm added.
Here's a breakdown of how each of the separate companies will look:
- New DuPont: This will be a diversified industrial company with brands such as Tyvek, Kevlar and Nomex. It will have a significant presence in the healthcare, electric vehicles and industrial sectors. The businesses within New DuPont generated sales of approximately $6.6 billion in 2023.
- Electronics: This company will specialize in electronic materials, including those used in semiconductor chip manufacturing, power management and thermal management. In 2023, this business achieved approximately $4.0 billion in sales.
- Water Solutions: This company will be a global leader in water technology with a portfolio including water filtration and purification solutions with leading technologies in reverse osmosis, ion exchange and ultrafiltration. This company will provide critical components and systems for multiple industries and generated approximately $1.5 billion in sales in 2023.
DuPont also announced that Lori Koch, currently the company's chief financial officer, will take over as CEO of DuPont on June 1. The company plans to announce the leadership teams of the new companies in advance of their separations.
DD's plan to separate follows in the footsteps of former industrial conglomerate General Electric – now GE Aerospace (GE) – which completed its massive three-way spinoff in early April.
Is DuPont a buy, sell or hold?
Analysts are mostly upbeat toward the materials stock. According to S&P Global Market Intelligence, the consensus analyst target price for DD stock is $83.72, representing implied upside of about 6% to current levels. Meanwhile, the consensus recommendation is a Buy.
Financial services firm UBS is one of the more bullish outfits on DuPont and sees the planned separation as a way to unlock value for shareholders.
"We see this as positive for the group and expect this to drive a higher value realization for the Electronics and Water businesses in particular, which we see as the most undervalued in the portfolio," UBS Global Research firm analyst Joshua Spector wrote in a note.
Specter rates DuPont a Buy with a $93 price target, representing implied upside of nearly 20% to current levels.
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