DuPont to split into three companies

DuPont Co., an iconic maker of plastics and chemicals, is splitting into three publicly traded companies.

Officials with DuPont in Wilmington, Del., announced the split May 22. Under the plan, DuPont would spin its electronics and water businesses into new firms, with the remaining DuPont continuing as "a premier diversified industrial company."

"As independent entities, both electronics and water will benefit from increased focus and agility," officials said. "At separation, each of the three companies will have strong balance sheets, attractive financial profiles and compelling growth opportunities."

DuPont also announced May 22 that Chief Financial Officer Lori Koch will replace Ed Breen as CEO on June 1. Breen will retain his role of executive chairman.

Antonella Franzen, currently CFO of DuPont's Water & Protection segment, will become CFO of the overall firm.

Following the separations, Koch and Franzen will remain in their respective positions for New DuPont, as officials are calling the remaining firm.

Plastics-related businesses will be retained in New DuPont. Those include Tyvek-brand protective films and Kevlar fibers. The firm will have a strong presence in fast-growing health care end markets including biopharma consumables, medical devices and medical packaging.

The two other new businesses have not been given a name. The electronics unit will cover materials for "key consumables used in semiconductor chip manufacturing" and advanced electronics. The water firm will handle materials for water filtration and purification solutions, DuPont said.

Keeping track of DuPont's plastic operations has required a scorecard in the past few years.

In 2022, DuPont sold most of its plastic materials businesses — including nylon resin, which had been invented by the firm — to Celanese Corp. for $11 billion in cash. Those businesses had annual sales of about $3.5 billion. That deal didn't include Tedlar fluoropolymer, Multibase silicone additives or Delrin acetal brands.

DuPont then sold 80 percent of the acetal business to private equity firm TJC LP in 2023. That business has since been renamed Delrin USA LLC.

Market veteran Peter Schmitt, managing director with consulting firm Montesino in Wilmington, said managing the ongoing regulatory and legal issues surrounding some materials in DuPont's portfolio may be a driver for the move.

Schmitt also identified two challenges for DuPont: restoring the consumer public's confidence that DuPont products not only offer major benefits but also are manufactured in a safe and sustainable fashion; and showing this reorganization will facilitate the large investments in new technology needed to meet 21st century needs.

DuPont now has gone through several cycles of organically growing multiple businesses, rolling up multiple businesses through acquisitions or some combination of those two strategies followed by spin-offs, according to Phil Karig, principal at Mathelin Bay Associates in St. Louis.

"The most common goals for spin-offs are to either concentrate more resources on a core business or to maximize shareholder value by making individual businesses easier for Wall Street to analyze and for individual investors to understand," he added. "DuPont is definitely hoping to achieve both."

Karig also cited DuPont's experience with Dow Inc. — which led to a merger and then a spin-off in a relatively short time period — as a possible indicator of future action.

"It wouldn't be surprising to see DuPont start down the acquisition trail again to buy business that aligns with the new DuPont and then spin off any non-core businesses that they acquire as part of any large acquisitions, thus repeating the cycle again."

Per- and polyfluoroalkyl substances (PFAS) liabilities “will be allocated among electronics, water and new DuPont on a pro rata basis,” the company said.

In a May 23 call with analysts, Breen said the company has “made good progress settling PFAS claims and expect more of that in next 18-24 months…it will keep getting diminished over time.”

In 2023, DuPont agreed to pay $400 million to U.S. water suppliers for issues related to PFAS chemicals. The firm also has agreed to pay $27.5 million to the state of Ohio for similar issues.

Officials said New DuPont will provide technologies for advanced mobility, including electric vehicles, and will remain a provider of advanced solutions serving safety, construction, aerospace and other industrial end markets.

Businesses included in New DuPont had sales of about $6.6 billion and operating earnings before interest, taxes, depreciation and amortization (EBITDA) margin of approximately 24 percent in 2023.

In a news release, Breen said the split "is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the creation of three strong, industry-leading companies."

DuPont expects to complete the separations in 18-24 months. The separation transactions will not require a shareholder vote and are subject to customary conditions, including final approval by DuPont's board of directors, regulatory approvals and completion of financing.