MERGERS & ACQUISITIONS
DowDuPont amends split plan Wilmington-based specialty products firm will be much larger under new breakup scheme “This was a comprehensive process by every measure,” DowDuPont’s executive chair, Andrew N. Liveris, declared to analysts in a conference call last week. Third Point appears to be satisfied. “We were pleased to be part of a dialogue that created such a positive outcome for all of DowDuPont’s shareholders,” the firm said. A key feature of the revamp is the decision to move from materials science to specialty products a chunk of Dow Corning representing about 40% of the silicones maker’s The specialty products firm will get Dow’s profits. The businesses being moved automotive adhesives business. are related to electronics, automotive lubricants, and thermoplastic Morgan Stanley stock analyst Vincent compounding. Andrews sees potential financial benefits DuPont’s performance polymers busifrom the shift. Investors are likely to give ness, which makes engineering polymers the materials science company a lower such as nylon and polyacetal, as well as Dow’s automotive adhesives and multiple—the ratio of stock price to annual earnings—than the faster growing fluids businesses, will also go specialty products firm. Likewise, investors to specialty products. They will in the large materials science firm might be housed together in a businot appreciate businesses with attractive ness oriented toward the auto expansion prospects. Moving them to speindustry. Executives hope additions from materials cialty products ensures “they receive a valDow’s water and process science (shown in red) will make for four uation commensurate with their specialty solutions unit, a supplier of well-rounded divisions: nature,” Andrews told clients. ion-exchange resins and reverse Total annual sales: $21 billion After the split, the materials science osmosis membranes, and Dow’s Segments: firm will have about $40 billion in annual building solutions business, ▸ Electronics and imaging ($5 billion) sales from petrochemicals, polyolefins, which includes its Styrofoam inMaterials for circuit board, photovoltaic, elastomers, acrylics, cellulosics, silicones, sulation board, are also going to and semiconductor fabrication and polyurethanes, and ethylene and propylspecialty products. silicones for electronics applications Specialty products will receive ene oxide derivatives. Specialty products will have about Dow cellulosic businesses relat▸ Safety and construction ($5 billion) $21 billion in sales. It will house four ed to food and pharmaceuticals. Corian countertop materials, Great roughly equally sized divisions: electronics, They will pair with food-related Stuff, ion-exchange resins, Kevlar and safety and construction, transportation and businesses the specialties comother aramid-fiber-based materials, polymers, and nutrition and biosciences. pany was already slated to have. reverse osmosis membranes, Styrofoam, One analyst asked during the conferThe Wilmington-based firm will and Tyvek protective polyolefin sheet ence call if these divisions could eventualso get Dow’s microbial control ▸ Transportation and advanced ally stand on their own as independent unit. polymers ($5 billion) firms. DowDuPont CEO Ed Breen kept the Laurence Alexander, an anaEngineering polymers, lubricants, and lyst with the investment firm Jef- door open. “We have all kinds of optionstructural adhesives feries, said the update to the split ality down the road to do what we want,” ▸ Nutrition and biosciences he said. is sweeping. “The realignment Morgan Stanley’s Andrews said those was more significant than we ($6 billion) had expected, as DowDuPont has words, taken with the portfolio shift, Biobased chemical processes, cellulosic “should provide investors confidence that opted to split Dow Corning and food and drug ingredients, enzymes, move some automotive adhesives the DowDuPont board is focused on using microbial control chemicals, probiotics, this unique merger transaction to maxiand films to specialty products,” soy-based food ingredients, and mize shareholder value.”—ALEX TULLO he wrote in a note to clients. sweeteners
Less than a week after it was formed, DowDuPont is making deep revisions to its plan to split into three separate companies within the next year and a half. Businesses that had previously been earmarked for the future Midland, Mich.based materials science firm will now go to the specialty products firm, to be based in Wilmington, Del. The businesses being shifted together generate more than $8 billion in annual sales and a healthy $2.4 billion in pretax earnings. The future agricultural chemical and seeds firm is untouched by the change. The overhaul of the planned division of DowDuPont into three firms follows criticism of the split by activist investors, notably Daniel S. Loeb of Third Point. Dow and DuPont responded by launching their own review of the plan. The firms hired McKinsey & Co. and consulted with more than 25 institutional investors.
C R E D I T: D OW
The future specialty products firm
SEPTEMBER 18, 2017 | CEN.ACS.ORG | C&EN
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