Don’t get used to DWDP stock, however. As discussed at the time of the merger announcement, the company plans to split into three independent publicly trade companies. According to the August 4 press release announcing the merger date, “The companies continue to expect the intended spin-offs to occur within 18 months of closing.”
Though we were skeptical of it, DuPont spinoff Chemours(CC) has surprised us, and many others, moving up to well over ten times its January 2016 low. The initial drop had come as a result of concerns over the company’s product liabilities and other legal issues. These concerns were mitigated by a settlement in which DuPont unexpectedly paid in hundreds of millions in additional cash.
DowDuPont plans to split into three companies- Material Science, Agriculture, and Specialty Products. Each will be large, with net sales of over $12 billion annually and EBITDA of over $3 billion annually.
In May, Dan Loeb of Third Point released a detailed presentation proposing that the company could unlock an additional $20 Billion in value by breaking into six parts instead of three. The company responded by hiring McKinsey to conduct a strategic review, but seems to be humoring Loeb rather than seriously considering his proposal. Whether we end up with three companies, six companies, or something else, the next 18 months promise to offer much interesting news and opportunity out of DWDP stock.
Disclosure: The author holds no position in any stock mentioned