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DuPont Considers Sale Of Biosciences Unit That Could Fetch $20 Billion

DuPont Considers Sale Of Biosciences Unit That Could Fetch $20 Billion
Mohamed Ahmed Soliman | Dreamstime.com

Tuesday, 06 August 2019 04:35 PM

DuPont de Nemours Inc. -- fresh off the breakup of chemical giant DowDuPont Inc. -- is considering unloading its nutrition and biosciences division, according to people familiar with the matter.

The Wilmington, Delaware-based specialty chemicals maker is working with advisers to evaluate options that could include selling or spinning off the business, said the people, who asked to not be identified because the matter isn’t public. It is also considering a so-called Reverse Morris Trust, or tax-free merger with another company.

Logical partners for that kind of deal could include Royal DSM NV, Kerry Group Plc, Givaudan SA and International Flavors & Fragrances Inc., the people said. Some of the suitors have lined up advisers for potential bids, the people said.

The division, which makes food additives and ingredients, could be worth at least $20 billion as a standalone entity, based on the trading multiples of rivals, the people said.

DuPont shares (DD) gained on the news, closing up 3.7% to $68.53 in New York, the biggest gain since June.

DuPont is in the early stages of the review and may opt to not proceed with a divestiture, they said. It also hasn’t started holding any formal talks with potential suitors yet, they added.

Representatives for DuPont and International Flavors declined to comment. Representatives for DSM, Kerry and Givaudan weren’t immediately available for comment.

DuPont, with a market value of about $50 billion, is one of the companies separated from DowDuPont, which was formed from the largest U.S. chemicals merger on record, completed in 2017. If DuPont succeeds in divesting the nutrition division, it would be left with businesses focused on materials for industries such as transportation, electronics and construction.

A potential sale would also extend a dramatic overhaul of DuPont’s portfolio as the company looks to salvage shareholder value in the face of slowing markets and the U.S.-China trade war that has crimped growth. DuPont split with Dow Inc. in April and in June spun off the Corteva Inc. agriculture business.

Noncore Sales

DuPont has already earmarked for sale six “noncore” businesses with a combined $2 billion in annual sales, including a unit that makes solar-panel materials. Chairman Ed Breen has said he would consider more moves.

DuPont could sell or spin major business units including nutrition or electronics and imaging, Breen said May 29 at an industry conference held by AllianceBernstein Holding LP. It has four major divisions that are big enough to stand on their own, he said.

'There’s also all kinds of interesting things we have to look at, which would be maybe structured transactions with other companies that would be very beneficial potentially to shareholders,' Breen said, according to a transcript compiled by Bloomberg. 'You’d get a lot of synergies. You’d create a de facto world leader in the business, and you’d be very tax efficient for our shareholders.'

For tax reasons, it can’t begin holding any talks with other companies until after the two-year anniversary of the combination that created its predecessor, he said. Dow and DuPont completed their merger on Aug. 31, 2017.

M&A Playbook

DuPont recently bolstered its mergers and acquisitions team with the hiring of Alex Khutorsky, a former partner at boutique investment bank Valence Group.

Analysts have suggested Breen may run a similar playbook for DuPont as he did when breaking apart DowDuPont. A serial dealmaker, Breen also engineered the breakup of Tyco International Plc.

“DuPont could just as easily become four separate companies, and we would not be surprised to see meaningful shareholder pressure to do so,” Morgan Stanley analyst Vincent Andrews said in June.

The nutrition and biosciences unit specializes in products from sweeteners and emulsifiers to dairy cultures and dietary fibers. DuPont has seen particular strength in areas such as plant-based meats and probiotics.

DuPont formed the Copenhagen-based division in May through the combination of its nutrition and health and industrial biosciences operations. The combined business has more than 10,000 employees and annual sales in excess of $6 billion.

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DuPont de Nemours Inc. -- fresh off the breakup of chemical giant DowDuPont Inc. -- is considering unloading its nutrition and biosciences division, according to people familiar with the matter.
dupont, sale, biosciences, unit
Tuesday, 06 August 2019 04:35 PM
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