DuPont, via Agence France-Presse â€" Getty Images Ellen Kullman, the chairwoman and chief executive of DuPont. The industrial conglomerate DuPont is splitting in two.
DuPont produces everything from solar panel components to Kevlar, and has a market value of nearly $57 billion. But in recent years, even as it increased its focus on higher growth areas such as agriculture and nutrition, a large portion of its revenue still came from the more volatile sale of conventional industrial products.
On Thursday, DuPont said it would spin off its performance chemicals segment into a new publicly traded company. The unit â€" which makes a pigment that turns paints, paper and plastics white, as well as refrigerants and polymers for cables â€" generated about $7 billion in revenue in 2012. But prices for its pigment products plunged in the second quarter, sending operating profits for the unit down 56 percent.
In July, DuPont announced it would explore strategic alternatives for its performance chemicals unit.
Soon after that announcement, the activist investor Nelson Peltz revealed that his fund, Trian Partners, had previously acquired a stake in DuPont. His holding of more nearly six million shares was worth about $345 million at the time of the investment, but represented less than 1 percent of the company. Mr. Peltz was later reported to have increased his stake to 2.2 percent, owning more than 21 million shares, according to The Wall Street Journal.
But DuPont’s chief executive, Ellen Kullman, denied that Mr. Peltz had influenced her decision to conduct a strategic review of the unit.
DuPont expects the spin-off to be completed in about 18 months, and said it would be tax-free to shareholders, who will receive stock in the new company. DuPont has hired Evercore and Goldman Sachs to advise it on the spin-off.
The DuPont that remains will have three main areas of focus, each trying to make products that address global population growth. Its agriculture business will develop and produce seeds and herbicides designed to boost crop yields around the globe. A bioindustrials unit will be involved in the production of biofuels in an effort to reduce the world’s reliance on fossil fuels. And an advanced materials segment will make components for green buildings and solar panels, as well as products like Kevlar.
“Following a thorough strategic review process over the last year, the spin-off of performance chemicals is clearly the best option to deliver enhanced value for our shareholders,†Ms. Kullman said in a statement. “This separation will advance the transformation of DuPont and result in two strong, highly competitive companies.â€
Spinning off its performance chemicals business is the latest big step in DuPont’s transformation. Last year, it sold its performance coatings business, which made paint for vehicles, to the Carlyle Group for $4.9 billion.
The spin-off is the latest example of big conglomerates divesting units and focusing on their higher growth businesses. Big institutional shareholders are looking for companies to separate their high and low growth units, and activist investors have also been pushing for spin-offs as a way to unlock value.
Mr. Peltz has been among those pushing for such changes at other companies. He successfully agitated for Ingersoll-Rand to spin-off units last year, and has a stake in Pepsi, which he is encouraging to spin its snacks business into a merger with Mondelez.
DuPont, based in Wilmington, Del., was founded more than 200 years ago by Eleuthère Irénée du Pont, a French political economist who fled to America during the French Revolution. The company evolved from a top gunpowder producer, supplying the U.S. Army during the Civil War, into the largest American chemical company. In recent years, DuPont has shifted from a focus on traditional industrial chemicals to investments on biotechnology and agricultural products.
DuPont shares, which have already risen 36 percent this year, were up another 2 percent in after hours trading on Thursday.
