Back to top

Image: Bigstock

DuPont (DD) Inks Deal to Divest Mobility & Materials for $11B

Read MoreHide Full Article

DuPont de Nemours, Inc. (DD - Free Report) recently entered into an agreement with Celanese Corporation (CE - Free Report) to divest more than 80% of the Mobility & Materials (M&M) segment for cash proceeds of $11 billion. This includes the Engineering Polymers business line and certain product lines within the Performance Resins and Advanced Solutions business lines. These businesses generated net sales of $3.5 billion and operating EBITDA of $0.8 billion in 2021. The deal is likely to close at the end of the current year. The divestiture will support DuPont’s ongoing portfolio transformation initiative.  

Through this deal, Celanese will be able to enhance its growth in high-value applications. Together, the companies will continue to boost material science innovation to serve customers. The latest agreement, which builds on DuPont’s recent buyout of Laird Performance Materials and its plan to acquire Rogers Corporation, strengthens the company’s foothold in the fields of electronics, water, industrial technologies, protection and next-gen automotive.

In November, DuPont agreed to acquire Rogers, a global leader in engineered materials and components for $5.2 billion. The buyout is expected to fortify DuPont's leadership position in advanced materials for high-growth secular end-markets that include electric vehicles, advanced driver assistance systems, 5G telecommunications and clean energy. The company will further bolster its position as the leading electronic solutions provider in the industry. It expects to realize around $115 million in run-rate cost synergies (pre-tax) by the end of 2023. The acquisition of Laird Performance Materials boosts DuPont’s position as a leading electronic materials provider and is expected to offer significant cost synergies.

The M&M transaction will maximize DuPont’s shareholders’ return while positioning it for long-term growth. The company will utilize the sale proceeds to fund the acquisition of Rogers and additional merger and acquisition scopes while continuing to buy back shares.

DuPont is on track to divest the Derlin business, which generated net sales of around $0.55 billion and operating EBITDA of approximately $0.18 billion in 2021. The company expects to close the deal in first-quarter 2023.

DuPont is actively managing its portfolio with an aim for value creation. The company is divesting non-core assets to focus more on high-growth, high-margin businesses. It also completed the divestment of the Solamet business during second-quarter 2021.

Last year, the company completed the merger of its Nutrition & Biosciences unit with International Flavors & Fragrances (IFF - Free Report) to form a new entity with 55.4% shareholding. The new entity is anticipated to be a global leader in high-value ingredients and solutions for food and beverage, home and personal care, and health & wellness markets with estimated pro-forma revenues of more than $11 billion and EBITDA of approximately $2.5 billion. Additional sales related to the merger is driving International Flavors’ revenue numbers. IFF realized $60 million of merger-related cost synergies in fiscal 2021, ahead of its targeted $45 million.

Price Performance

DuPont’s shares are up 16.5% in a year compared with an 8.3% rise recorded by the industry.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & Stock to Consider

DuPont currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the basic materials space is Commercial Metals Company (CMC - Free Report) , which sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 23% in the past 60 days.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 13.1%. CMC’s shares have surged around 61% in a year.