Why A DuPont Breakup Is Now 'Likely'

• E I Du Pont De Nemours And Co DD has named interim CEO Ed Breen as permanent chairman and CEO.
• Deutsche Bank believes that Mr. Breen will likely pursue a breakup of the company.
• A potential breakup would likely unlock value for shareholders and make DuPont’s seed business a buyout target for large agriculture rivals.

DuPont has named interim CEO Ed Breen as permanent chair and CEO, and Deutsche Bank analyst David Begleiter believes a breakup of the company is likely now seriously on the table. In a new note, Begleiter explains why the move could be a profitable one for shareholders and could also open the door to further M&A by the company.

The Resume

The 59-year-old Breen has been on DuPont’s board since February of 2015, but previously served as CEO of Tyco International PLC TYC from 2002-2012. Begleiter believes this experience is critical, as Breen oversaw two different breakups during his Tyco tenure.

The Possible Plan

Begleiter anticipates that the most likely course of action would be for DuPont to choose to separate its Agriculture, Nutrition & Health and Industrial Biosciences divisions; its Performance Materials, Safety & Protection, and Electronics divisions; and its Corporate/Other divisions into three separate entities.

Begleiter has been calling for a breakup of DuPont for some time now, but he believes that the latest news makes it much more likely to come to fruition.

“With the appointment of Mr. Breen as CEO, we believe the likelihood of DuPont being broken up has increased substantially,” he explained in his report, adding that the breakup could happen as soon as Q4.

Outlook

In addition to unlocking value for shareholders, Begleiter expects that a breakup could make DuPont’s seed business a hot buyout target in a coming agriculture M&A wave. He believes both Dow Chemical Co DOW and Syngenta AG SYT would likely be willing to pay a steep price for DuPont’s seed business.

Deutsche Bank maintains its Buy rating and $70 target for DuPont’s stock.

Disclosure: the author holds no position in the stocks mentioned.