DuPont to Split Into Three Companies as CEO Ed Breen Steps Back

DuPont to Break Up into Three Focused Entities

DuPont de Nemours Inc. (NYSE: DD) revealed on Wednesday its plan to divide into three distinct publicly traded companies. The split aims to streamline operations and boost returns by creating more focused businesses, following the footsteps of other industrial conglomerates like Johnson & Johnson and General Electric.

Strategic Breakdown

DuPont will separate its electronics and water units through tax-free transactions. The remaining operations will concentrate on industries such as biopharma and medical devices, continuing to produce well-known products like Tyvek and Kevlar.

• Electronics Division: Expected to have generated $4 billion in revenue in 2023.
• Water Unit: Accounted for $1.5 billion in revenue last year.
• Core Business: Will be the largest segment, responsible for approximately $6.6 billion of DuPont’s 2023 sales.

Leadership Changes

The company also announced that Ed Breen, who returned as CEO in 2020, will step down from his position on June 1. Breen will remain as executive chairman of the new core company, while Lori Koch, the current CFO, will step into the role of CEO.

"Splitting apart will give each new company greater flexibility to pursue their own focused growth strategies, including portfolio-enhancing M&A," Breen stated.

Market Reaction and Historical Context

Following the announcement, DuPont shares rose 5.3% in extended trading. The stock has seen a 2% increase this year, positioning the company's market value at roughly $33 billion. This move continues DuPont's long history of strategic dealmaking and portfolio reshaping, including its previous merger with Dow Chemical and recent divestitures like the sale of a controlling stake in Delrin for $1.8 billion.

Breen's history of successful breakups, notably at Tyco International, underscores his strategic expertise. At Tyco, he engineered breakups that resulted in the creation of TE Connectivity and Covidien, followed by another split into three businesses.

Broader Industry Trends

DuPont's decision mirrors a broader trend among traditional industrial conglomerates, which are finding fewer benefits from maintaining large, diversified structures. According to Barry Cross, a professor at Queen’s University Smith School of Business, these conglomerates are increasingly seen as "loose collections of parts" that may provide more value when managed as separate entities.

This trend is exemplified by General Electric's recent spinoffs. GE spun off its energy-related businesses in April and its healthcare unit earlier in 2023, leading to a 58% rise in its shares this year.

Financial and Advisory Details

The separation process is expected to be completed within 18 to 24 months, pending shareholder approval and regulatory clearances. DuPont has reaffirmed its second-quarter and full-year financial guidance amidst this strategic overhaul.

Centerview Partners LLC and Goldman Sachs are acting as DuPont’s financial advisers, while Skadden Arps Slate Meagher & Flom LLP serves as legal counsel.

DuPont's planned split into three companies represents a bold step aimed at enhancing shareholder value and operational efficiency. As the company navigates this significant transition, the market will be closely watching how the new entities perform independently and the strategic moves they undertake in their respective sectors.

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