DowDuPont: The Break-Up, the Shake-Up, the Future Make-Up revealed

March 7, 2018 |

This week, the DowDuPont leadership team emerged from had become Wilmington’s largest sensory deprivation chamber and fanned out around the country to advise on the timing and specific nature of the break-up into three companies of the conglomerate formed in recent months by the Dow and DuPont mergers.

Now Materials Sciences, later: Dow

The Materials Science Division will be called Dow, will retain the Dow diamond as its brand, and will headquarter in Midland, Michigan. Jim Fitterline is the division’s COO. It will begin independent life, by the end of March 2019, nearly $44 billion in 2017 pro forma revenue and $9.1 billion in 2017 pro forma operating EBITDA. It will focus on packaging, infrastructure and consumer care and include the historic businesses and brands from performance materials and coatings, packaging, specialty plastics, and a grab-bag described as ‘industrial intermediates and infrastructure’.

Now Specialty Products, later: DuPont

The Specialty Products company, headquartered in Wilmington, Delaware, will retain the DuPont name and include  DuPont Industrial Biosciences, advanced polymers, construction, electronics and imaging, and safety.  It is expected to begin independent life with $21 billion in 2017 pro forma revenue and $5.3 billion in 2017 pro forma operating EBITDA.

Marc Doyle, chief operating officer, Specialty Products Division of DowDuPont, said, “For more than 200 years, customers have looked to DuPont to help them turn their best ideas into real-world products. We are creating a premier innovation-driven specialty leader, drawing on expertise and assets from both heritage Dow and DuPont, which delivers the essential advances that our customers—and the world—need to thrive. We are deeply proud to have this company carry the DuPont™ name into the future.”

Now, Corteva Agriscience: the long-awaited AgCo

Which brings us to Agriculture, which is expected to spin-off by the end of June 2019 and has been named Corteva Agriscience, which the branding team explains utilizes words that mean “heart” and “nature” — although, go figure. Corteva Agriscience brings together DuPont Crop Protection, DuPont Pioneer and Dow AgroSciences to create a market-shaping, standalone agriculture company with leading positions in Seed Technologies, Crop Protection and Digital Agriculture.

The company will continue to offer products under a number of the most recognized and premium brands in agriculture: Pioneer, Mycogen, the newly launched Brevant Seeds, and its award-winning Crop Protection products, such as Aproach Prima fungicide and Quelex herbicide with Arylex active, as well as others it will introduce as it brings new products to market.  Which is to say, only Wall Street professionals will have to think entirely upon the Corteva brand — and the canyons of lower Manhattan are not generally known as places where memes based on “heart” and “nature” are not generally known to resonate.

For Wall Street, maybe it really stands for Cash, OR Techno-Economic Value-Add.

Jim Collins, the chief operating officer, Agriculture Division of DowDuPont and at one time the popular leader of DuPont Industrial Biosciences who oversaw the DuPont acquisition of Danisco, said, “This is the start of an exciting journey…with the most balanced portfolio of products in the industry, nearly a century of agronomic expertise and an unparalleled innovation engine, Corteva Agriscience will become a leading Agriculture company, focused on working together with the entire food system to produce a secure supply of healthy food.”

Corteva will begin independent life based on more than $14 billion in 2017 pro forma revenue and $2.6 billion in 2017 pro forma operating EBITDA, the Agriculture Division has the most comprehensive and balanced seed and crop protection portfolio in the world and a strong pipeline of new products that will enable it to continue to provide substantial value to farmers now and over the long term. Corporate HQ will be in Wilmington and the old Pioneer complex in Johnston, Iowa, and the Dow AgroSciences center in Indianapolis, Indiana will serve as Global Business Centers, with leadership of business lines, business support functions, R&D, global supply chain, and sales and marketing capabilities concentrated in the two Midwest locations.

The Bottom Line

Critics are going to carp forever about whether Dow and DuPont should be one company, remained apart as two, spilt into three or split into as many as six. Given the sky-high M&A market, there’s been some consternation among Wall Street investors over whether CEO Breen really ought to be breaking up the company into as many pieces for maximized, specialized value as possible right now.

Generally speaking, everyone sees the sense of the agriculture company bringing together seeds and crop protection.  And a materials science company based around Dow’s historic plant set — supplemented by DuPont’s remainders in that area after DuPont spun out performance chemicals into Chemours in 2015.

It’s the combination of the electronics, construction, food-supplement, safety, and industrial biosciences into the new DuPont that perplexes some. Some speculate that Breen’s strategy is to break-up and unlock the shareholder value in two stages — as he did with Tyco between 2007 and 2010 — more on that theory here.

The other way of looking at this is convergence — that the boundaries between electronics and biosciences are breaking down. That biology is beginning to look an awful lot like a very large subsystem within information sciences — or the other way around. And that you don’t just yet want to fully separate electronics, construction, and industrial biosciences until we understand exactly what the materials of the future are going to be.

That was, in some ways, the Ellen Kullman version of the company — keeping everything under one roof until we understood more fully the possibilities of industrial biosciences to transform electronics and information sciences, agriculture and materials sciences.

But it was clear that Kullman broke her pick trying to explain that vision to Wall Street, and that the one product that the old DuPont really needed was something to address Attention Deficit Disorder on Wall Street.

Wall Street requires corporate strategies these days shorter than a Tweet and that take less time to deliver upon than a baseball game. Breen gets that, and plays with that.

All of which suggests that Speciality Products will become more and more specialized — because the real jewel is Industrial Biosciences and its opportunities for rapid growth. We may see more paring and peeling down the line when the dust has settled from this wave — think 2020 or so, especially if there begins to be any nervousness around Wall Street that President Trump’s’ Occupy White House run might be over.

 

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