Dow Chemical and DuPont announced on 29 June that they have engaged McKinsey & Co. to assist in reviewing the composition of the three companies they intend to spin-off following the closure of their merger.
In a joint statement, the companies said both boards support a “comprehensive portfolio review for DowDuPont.” The review is “intended to assess current business facts and leverage the knowledge gained over the past year and a half to capture any material value-enhancing opportunities in preparation for the intended creation of three industry-leading companies.” The companies reaffirmed their expectation to close the merger by the end of August, with the separation into three independent, pure-play companies also expected to occur within the original timeline of 18 months post-close. These companies will include a materials science company, an agriculture company, and a specialty products company.
Wednesday’s announcement comes less than a month after activist hedge fund Third Point (New York), led by investor Dan Loeb, called for the companies to shift several “high-multiple” businesses from their planned materials science spin-off into the planned specialty products company. Third Point argues that the change could create $20 billion in additional value by shifting high-multiple businesses into more focused companies that it thinks will trade at premium multiples. Third Point says the planned specialty products spin-off could be further split into as many as four public companies.
“Our review will provide an in-depth look at the portfolio mix and alignment across divisions to ensure we capitalize on all value-enhancing opportunities. The output of the review will be an immediate focus for the DowDuPont Board following merger close,” says Alexander Cutler, lead director of DuPont and former chairman and CEO of Eaton Corporation.
Jeff Fettig, lead director of Dow, and chairman and CEO of Whirlpool, adds that the collective board is committed to ensuring that each of the intended companies “will have clear focus, an appropriate capital structure, a distinct and compelling investment thesis, scale advantages, and focused investments in innovation to better deliver superior solutions and choices for customers.
Additional details about the nature of the review were not disclosed.
By Rebecca Coons
Source: Chemical Week
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