DuPont plans to spin off into three independent listed companies, becoming another large industrial group in the United States that aims to increase shareholder returns through business spin offs.
On May 22nd local time, DuPont announced that it will spin off its electronic and water businesses through tax-free transactions and establish two independent listed companies. The newly established electronic company mainly includes DuPont's existing semiconductor technology and interconnection solutions business, while the water company undertakes DuPont's water solutions business.
The remaining business of DuPont will be concentrated in the fields of biopharmaceutical consumables, medical equipment and medical packaging, electric vehicle mobility solutions, etc. These businesses will be formed into the "New DuPont" company.
After the above-mentioned spin off, "New DuPont" will become the largest business among the three independent listed companies, with sales of $6.6 billion in 2023. The electronics business that was about to be divested had a revenue of $4 billion last year, while the water business had a revenue of $1.5 billion.
On the day of the announcement of the spin off, DuPont's stock price fell 1.22% to $78.55, but the after hours trading price rose 4.52% to $82.1.
Professor and Vice Dean of the Smith School of Business at Queen's University, Barry Cross, commented that traditional industrial conglomerates are loose sets of parts that are no longer valuable when pieced together. Business breakdowns can provide more value for focused leadership teams and reduce interference from sibling departments.
DuPont's current CEO, Edward Breen, stated in a statement that the spin off will give the new company greater flexibility to pursue their respective focused growth strategies, including strengthening their investment portfolio through mergers and acquisitions.
Brin led a large-scale merger between DuPont and Dow Chemical in 2017, and restructured the company after the establishment of the joint venture Dow DuPont, splitting it into three independent listed companies. Among them, the chemical business belongs to the new Dow Chemical, a new company Kodihua has been established in the agricultural sector, and the new DuPont company operates in the special products business.
At the same time as DuPont announced its latest spin off plan, it also announced a leadership adjustment plan. Brin will step down as CEO on June 1st and transfer to the position of Executive Chairman of the company. DuPont's current Chief Financial Officer, Lori Koch, will serve as CEO from June 1st.
DuPont is expected to complete its latest spin off plan within 18-24 months, subject to shareholder voting and regulatory approval.
Before the announcement of DuPont's spin off, GE has become the latest example of large industrial groups seeking to create value through spin offs.
This manufacturing giant spun off its healthcare division for listing in early 2023 and then spun off its energy related business in April of this year, listing separately on the New York Stock Exchange under the name GE Vernova.
After the aforementioned spin off, aviation engines have become GE's main business and the company has been renamed as GE Aerospace, becoming an independent listed company.
DuPont announced earlier this month that it will increase its annual sales forecast from $11.9-12.3 billion to $12.1-12.4 billion. DuPont stated that due to the recovery of the electronics market and the rebound in sales in the water treatment sector, it is expected that both sales and sales will increase in the second half of the year.
The company also raised its adjusted earnings per share forecast for 2024, from the previous estimate of $3.25-3.65 to $3.45-3.75.