(Bloomberg) – DuPont de Nemours Inc. plans to split into three publicly traded companies and join a list of industrial conglomerates looking to boost their returns by splitting into smaller, more focused companies.
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The company will separate its electronics and water units through tax-free transactions, DuPont announced in a statement Wednesday. The remaining activities will be focused on sectors such as biopharmaceuticals and medical devices, with products such as Tyvek and Kevlar.
The announcement follows a parade of corporate icons such as Johnson & Johnson, United Technologies, Danaher Corp. and General Electric Co. who have given up in recent years in their attempts to create additional value for shareholders.
Many traditional industrial conglomerates benefit less from synergies such as bundled fixed costs, says Barry Cross, professor and assistant dean at Queen’s University Smith School of Business.
“They are loose collections of parts that no longer always make sense to keep together,” says Cross, who once worked at DuPont but is no longer affiliated with the company. Splitting “can deliver more value with focused leadership teams and less distraction from brother and sister units,” he said.
Chief Executive Officer Ed Breen, who returned to the role in 2020, will step down effective June 1, the company said. He will retain the role of executive chairman of the remaining company, while Chief Financial Officer Lori Koch will assume the role of CEO.
The split will give each new company “greater flexibility to pursue its own targeted growth strategies, including portfolio-strengthening mergers and acquisitions,” Breen said in the statement.
The breakup continues DuPont’s long history of dealmaking and portfolio reform. About a decade ago, the company agreed to merge with Dow Chemical and then spin off some operations. DuPont has also recently explored divestitures, agreeing last year to sell a controlling stake in Delrin for $1.8 billion.
Once the final split is complete, the remaining company will be the largest portion, responsible for about $6.6 billion of DuPont’s sales in 2023. The electronics company that would be spun off had $4 billion in sales last year, while the water unit according to DuPont was worth $1.5 billion.
Shares of DuPont rose 5.3% in extended trading at 6:16 p.m. in New York. The stock was up about 2% this year through Wednesday’s close, giving the company a market value of about $33 billion.
Breen previously engineered several rifts when he was CEO of Tyco International: a 2007 deal that created TE Connectivity and Covidien, and a later deal to divide the remaining company into three companies.
Read more: DuPont’s $200B M&A deal raises costs for Evercore, Goldman
GE became the latest example of a blue chip industrial company that wanted to create value by splitting up. The manufacturing giant divested its energy-related businesses in April after separating from its healthcare unit in early 2023. Shares of GE, now primarily a jet engine maker, are up about 58% this year through Wednesday’s close.
DuPont expects to complete the separations within 18 to 24 months, subject to shareholder voting and regulatory approval. The company also confirmed its second-quarter outlook and full-year financial guidance on Wednesday.
Centerview Partners LLC and Goldman Sachs are serving as financial advisors to DuPont, while Skadden Arps Slate Meagher & Flom LLP is serving as legal advisor.
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