DuPont to Split Into Three Companies as CEO Breen Steps Back

DuPont to Split Into Three Companies as CEO Breen Steps Back

(Bloomberg) — DuPont de Nemours Inc. plans to split into three publicly traded companies, joining a list of industrial conglomerates seeking to boost returns by splitting into smaller, more focused businesses.

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The company will separate its electronics units and water units via tax-free transactions, DuPont said in a statement Wednesday. The remaining operations will be focused on sectors such as biopharmaceuticals and medical devices, with products like Tyvek and Kevlar.

This announcement follows a parade of iconic companies such as Johnson & Johnson, United Technologies, Danaher Corp. and General Electric Co., which split in recent years in an effort to create additional shareholder value.

Many traditional industrial conglomerates get less benefit from synergies such as pooling fixed costs, said Barry Cross, professor and assistant dean at the Smith School of Business at Queen’s University.

“These are collections of individual parts that no longer always make sense to keep together,” said Cross, who once worked at DuPont but currently has no ties to the company. The separation “can deliver more value with focused management teams and fewer distractions from sibling units,” he said.

CEO Ed Breen, who returned to the role in 2020, will step down on June 1, the company announced. He will retain the role of executive chairman of the remaining company while CFO Lori Koch assumes the CEO role.

The separation will give each new company “greater flexibility to pursue its own targeted growth strategies, including portfolio enhancement in mergers and acquisitions,” Breen said in the release.

The split continues DuPont’s long history of negotiating deals and overhauling its portfolio. About a decade ago, the company agreed to merge with Dow Chemical and subsequently spun off some operations. DuPont has also considered divestitures recently and last year agreed to sell a majority stake in Delrin for $1.8 billion.

Once the latest spinoff is complete, the remaining company will make up the largest share, responsible for about $6.6 billion of DuPont’s sales in 2023. The electronics business that will be spun off generated revenue of 4 billion last year, while the water unit accounted for $1.5 billion, according to DuPont.

DuPont shares rose 5.3% in extended trading at 6:16 p.m. in New York. The stock had gained about 2% this year through Wednesday’s close, giving the company a market value of about $33 billion.

Breen had previously engineered several breakups while CEO of Tyco International: a 2007 deal that created TE Connectivity and Covidien, and another later to split the remaining company into three companies.

Read more: DuPont’s $200 billion M&A man generates fees for Evercore and Goldman

GE has become the latest example of a blue-chip industrial company seeking to create value by breaking up. The manufacturing giant spun off its energy-related businesses in April after spinning off its healthcare unit in early 2023. Shares of GE, which is now primarily a maker of jet engines, have soared about 58% this year through Wednesday’s close.

DuPont expects to complete the separations within 18 to 24 months, subject to shareholder votes and regulatory approvals. The company also reaffirmed its second-quarter outlook and full-year financial guidance on Wednesday.

Centerview Partners LLC and Goldman Sachs are DuPont’s financial advisors, while Skadden Arps Slate Meagher & Flom LLP is its legal advisor.

(Adds comments from a business school professor from fourth paragraph.)

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