Understanding the DowDuPont Split and Its New Companies

The DowDuPont split is a significant development in the business world, and understanding it can be a bit complex.

DowDuPont was formed in 2015 through the merger of Dow Chemical and DuPont.

In 2019, DowDuPont split into three separate companies: Corteva, Dow, and DuPont.

Corteva is a leading producer of agricultural products, such as seeds and pesticides.

Dow is a global leader in materials science, with a focus on packaging, infrastructure, and consumer solutions.

DuPont is a science-based company that specializes in materials science, safety, and protection, as well as nutrition and biosciences.

The split was designed to allow each company to focus on its core business and compete more effectively in its respective market.

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DuPont de Nemours, a 220-year-old American corporate powerhouse, is breaking up into three publicly traded companies.

The breakup is expected to be completed within 18 to 24 months, and it's subject to final approval by DuPont's board of directors.

DuPont's current CEO, Ed Breen, will stay on as executive chairman, while Lori Koch, the chief financial officer, will step into the CEO role effective June 1.

The three smaller companies will have greater flexibility to pursue their own focused growth strategies, including portfolio-enhancing mergers and acquisitions.

This is the second DuPont breakup in half a decade, following the 2019 breakup of DowDuPont into three separate entities: DuPont, Dow Chemical, and Corteva.

The new electronics company will focus on semiconductor solutions and advanced electronics products, while the new water company will be a comprehensive water solutions provider.

DuPont's breakup comes amid a trend of large, multinational companies announcing breakups in recent years, with many CEOs and corporate boards touting the agility of smaller companies.

Investors are advised to be patient and not rush into buying the new companies, as there may be volatility and housekeeping in the first couple of quarters after the spin-off.

It's recommended to wait until the end of the year to get a better handle on what the new companies are and their outlook.

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Dow and DuPont are no longer the same companies they were a few years ago. DowDuPont's merger with Dow and DuPont resulted in a new company that trailed the S&P 500 by almost 30%.

Unless you really want exposure to both an agtech company and special materials, there's no reason to buy into DowDuPont now.

The new Dow and DuPont companies are distinct from their predecessors. Dow and DuPont are now separate entities with different business profiles.

Investors should be patient and wait for a couple of quarters to see how these new businesses play out. This will give management a chance to lay out their vision and opportunities for the future.

A quarter or two of management's strategy will give investors a better handle on what these businesses are and where they're headed.

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The new Dow is a value play with a market cap of $33.5 billion, focusing on performance chemicals, chemical additives, and packaging.

Dow's products serve a wide variety of industries, including automaking, construction, and packaging, providing sufficient portfolio diversity.

Most of Dow's assets are mature, making it a value play rather than a growth play, and it's expected to pay a substantial dividend.

The annual dividend yield for Dow is around 6.1%, which is robust for this sector.

Dow's CEO, Jim Fitterling, announced $75 million in year-over-year savings in combined selling, general, and administrative expenses and research and development costs in Q2.

The company's cumulative synergy savings since the merger of DuPont and Dow is $1.1 billion.

DuPont's portfolio is focused on specialty materials, high-growth materials, and nutrition, with a market cap of $49.6 billion.

DuPont's products are materials that can be made into finished products by themselves, unlike Dow's products which are mostly components of or coverings for other materials or goods.

Kalrez, a product in DuPont's portfolio, is used to make seals for semiconductor and chemical processing and is expected to have a 10% growth rate through 2022.

DuPont's dividend yield is currently much lower than Dow's, at around 1.8%, reflecting the company's focus on growth rather than dividends.

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If you're a shareholder of DowDuPont, you're likely to find yourself owning shares of all three companies - Dow, DuPont, and Corteva - after the spinoff.

So far, the value proposition has been a winning one, with three shares of DowDuPont at market close on April 1 worth around $111, while the three new companies now trade at a combined $140.

It's probably not a good idea to sell shares you already own until a clearer picture emerges.

Dow and DuPont are looking like strong choices for value and growth investors, respectively.

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