A recent piece in Barron’s notes that “Sanford Bernstein analyst Jonas Oxgaard recently called the DowDuPont merger and 3-way split the “most complicated action in corporate history.”” It goes on to note, regarding the scale of the transactions:
Oxgaard’s claim is difficult to verify, but it doesn’t feel far from the truth.
Consider, legacy-Dow and legacy-duPont announced their intention to form the largest chemical company in the world 1,266 days ago. The deal was approved 630 days after that and the final split will be completed on June 1, 638 days after merger approval.
Well, now it’s done. With the completion of the spinoff of Corteva(CTVA) this past weekend, DowDuPont is no more. The remaining stub has once again taken on the DuPont de Nemours, Inc. name, and is known once again to its friends as DuPont(DD) for short. The DWDP ticker is gone forever, and the old DD ticker is back for the new DuPont. Immediately after the Corteva spinoff, concurrent with the name change, the company executed a 1 for 3 reverse split. For every three shares of DowDuPont stock a shareholder owned, they now own 1 share of DuPont stock instead. Ed Breen, who presided over this series of complex transactions as well as Tyco’s years ago, remains Executive Chairman of DuPont.
The new DuPont launches today with leading market positions in four core markets and strong geographic, customer and end-market diversification,” said Ed Breen, Executive Chairman of DuPont. “The company expects to drive above GDP growth through disciplined innovation, a relentless focus on ROIC, and a best-in-class cost structure. With these priorities, combined with active portfolio management and a commitment to capital returns, DuPont will remain intently focused on delivering value for our shareholders.”
Marc Doyle, Chief Executive Officer of DuPont, added, “DuPont is uniquely positioned to leverage its balanced portfolio, deep customer relationships, R&D expertise, and competitive operating model to win in the marketplace and drive value for all its stakeholders. The company is differentiated by its materials, ingredients and solutions expertise aligned with attractive, high-growth market trends – particularly health and wellness, advanced mobility, connectivity and sustainability – where our customer-driven innovation and value-added solutions play a transformational role.”
One thing DuPont did not mention in its press release? PFAS. Barron’s suggests that PFAS is responsible for DowDuPont’s recent underperformance. Prior to Dow(DOW) and DuPont’s merger and subsequent machinations, DuPont spun off Chemours(CC) in 2015. At the time, we expressed concern about the potential for environmental and health liabilities to drive the company into bankruptcy. Chemours surprised us, rising over 10 times from its lows as DuPont agreed to pay hundreds of millions of dollars that it was thought Chemours would be responsible for. Now, these concerns have come rushing back.
New Hampshire has followed New Jersey in filing suit against both Chemours and DowDuPont over PFAS.
The lawsuits allege that the companies produced the chemicals, which are linked to cancers and other serious health issues, knowing they could seep into natural resources and harm residents.
Chemours stock is down over 47% since April 15. Meanwhile, Chemours has filed suit against DuPont, DowDuPont and Corteva over undisclosed claims. All we know is that it is “[an] action for declaratory judgment and other relief relating to a spin-off transaction.”
All that should take a while to get sorted out and could weigh on both Chemours and DuPont for some time. We should note that DuPont seems unworried, having announced a $2 billion share buyback approval this weekend.
Meanwhile, Corteva Agriscience completed its spinoff from DowDuPont, and is now an independent company. Shareholders received one share of Corteva stock for every 3 shares of DowDuPont stock owned.
“Today marks the launch of a new kind of agriculture company, well positioned to compete and win by providing farmers the complete solution they need for sustainable, long-term growth and improved profitability,” said Jim Collins, Chief Executive Officer of Corteva Agriscience. “As a global leader in the combined $100 billion seed and crop protection market, Corteva Agriscience has the most robust pipeline in the industry, a world-class innovation engine, and advantaged routes to market that provide us with unparalleled customer relationships – all of which will fuel our growth as an independent company and drive value for stockholders. Our more than 21,000 dedicated employees are committed to fulfilling our purpose to enrich the lives of those who produce and those who consume, ensuring progress for generations to come.”
With a presence in more than 140 countries, Corteva Agriscience generated $14 billion in net sales in 2018. The Company has more than 150 research and development facilities and more than 65 active ingredients.
“As a new, independent agriculture company, we are intently focused on disciplined investment in innovation to deliver above market organic revenue growth and improve Return On Invested Capital,” said Greg Friedman, Executive Vice President and Chief Financial Officer of Corteva Agriscience. “We are on schedule on our commitment to achieve $1.2 billion in cost synergies by 2021, and we are confident in our plan to expand margins. Equally important, we are committed to returning significant capital to stockholders through a combination of dividends and share repurchases.”
You may be wondering, where the name Corteva comes from. Wonder no more.
The new Company’s name, Corteva Agriscience(kohr-‘teh-vah), is derived from words meaning “heart” and “nature.” The branding acknowledges the Company’s history while looking forward to its commitment to enhancing farmer productivity as well as the health and well-being of the consumers they serve.
We presume the “Cor” comes from the Spanish corazon, or heart, and “teva” from the Hebrew teva, or nature. We’re unclear on how this acknowledges the company’s history or looks forward to the company’s commitment to enhancing farmer productivity or consumer health and well-being, but, hey, branding guys have got to make a living.
Corteva will also join DuPont in the S&P 500, replacing Fluor(FLR) which will move to the S&P MidCap 400.
Disclosure: The author owns shares of Dow