Nonstick: DuPont May Spin Off Performance Chemical Business Including Teflon

By |
0 Comment
There are few companies in America with as long a history as DuPont (DD). Started as a gunpowder mill in Delaware in 1802, the company has been a fixture on the American business landscape for over two centuries. DuPont was a force behind the creation and growth of General Motors (GM) and invented many of the signature materials of the 20th century, including nylon, Teflon, Freon, Mylar, Tyvek and Kevlar.  Over the past few years, CEO Ellen Kullman has moved to transform the business to focus on agriculture, nutrition, and biotech. Earlier this year Carlyle Group (CG) bought the company’s automotive paints business for $4.9 billion.  Late last month, the company announced that it was considering a spinoff or sale of its Performance Chemical business. The unit, which is the leading producer of titanium dioxide paint, as well as materials like Teflon, had $7.2 billion in sales last year and accounted for over half of Dupont’s profit at $1.59 billion. The company wishes to divest the unit due to the high volatility in its performance.

Several weeks before this announcement, it was revealed that Nelson Peltz of Trian Fund Management had taken a significant stake in DuPont. Peltz has often agitated for spinoffs, for example, recently in Ingersoll-Rand(IR), which will soon spin off Allegion.  It appears that the decision to explore this restructuring was made absent any pressure from Peltz.  Though it may not have been his doing, Peltz is likely pleased with the move. A spinoff of the performance chemical business would immediately create a large, profitable company that would be a dominant player in the spaces in which it competed.

Disclosure: The author holds no position in any stock mentioned

Related articles