DuPont recently signed an agreement with Kuraray, a Japan-based chemical manufacturer, to sell off its glass laminating solutions/vinyls business as it continues to increase its focus on the high-growth agricultural products, industrial biosciences, and health and nutrition markets.  As part of its plan to reduce reliance on volatile, commodity-based markets, DuPont also announced earlier that it would be spinning off the cyclical performance chemicals business over the next few quarters. 
DuPont generates revenues by supplying high-performance materials and chemicals, electronic materials, high-performance coatings and agricultural products, to industries and consumers worldwide. Most products manufactured by DuPont are used as raw materials by other industries, making it a predominantly B2B (business-to-business) based company with the exception of the agriculture and nutrition divisions.
Our $64 price estimate for DuPont is almost in line with its current market price.
- Dupont Q4 Earnings: Company Positive On Dow Merger & Cost Saving Plan, But Weak Agro Sales And Currency Headwinds Continue To Hurt Operations
- Dupont Q3 Earnings: Weak Agro Products Sales and Currency Headwinds Hurt Operations, And Will Continue To Do So In Near Term
- DuPont 2Q: Soft Agricultural Markets and Currency Headwinds Weigh On Earnings
- DuPont: Soft Agricultural Products Market and Currency Headwinds To Weigh On 2Q Earnings
- DuPont Close To Another Transformational Milestone With Chemours Spin Off
- DuPont’s Earnings Decline On Lower Corn-Seed Sales, Stronger U.S. Dollar
DuPont’s Glass Laminating Solutions (GLS) business primarily deals in polyvinyl butyral and ionomer sheets for safety glass. Polyvinyl butyral is a synthetic organic polymer which is most commonly used in laminated safety glasses for automobiles and buildings. It is sandwiched between two glass layers to reduce the overall brittleness of the material.
Vinyl acetate monomer, which is used in adhesives and polyvinyl alcohol (PVA) products that are used in a variety of automotive and industrial purposes, are also a part of the deal. All these products come under the Performance Materials division of DuPont, and contributed more than $500 million to the company’s total sales revenues in 2012. 
At $543 million, the deal values DuPont’s GLS business at a price/sales ratio of just over 1.0, while the overall company is currently valued at a price/sales ratio of over 1.6. This reflects limited growth potential and below-average profitability of the business as compared to the overall company. The deal also falls in line with the nature of other portfolio actions taken by DuPont over the past few years, such as:
- Acquisition of the food, enzymes and bio-products company, Danisco in 2011
- Sale of the performance coatings business in 2012
- Acquisition of the international soy ingredients joint venture, Solae in 2012
- Acquisition of the African seed giant, Pannar completed in 2013
- Recently announced spin-off of the Performance Chemicals division
All these actions suggest that DuPont has been slowly increasing its focus on agricultural products, health and nutrition, and industrial biosciences businesses, which could allow it to leverage the close integration of these businesses based on innovations in the chemicals and biotechnology fields. (See: A Closer Look At DuPont’s Plans For The Biofuels Market) Furthermore, as the company continues to strengthen its position in the performance materials, safety and protection, and the electronics and communications segments, it also aims to improve the overall profitability of these divisions by doing away with more volatile, commoditized businesses, such as the GLS.Notes:
- Kuraray To Acquire DuPont’s Glass Laminating Solutions/Vinyls, dupont.com [↩] [↩]
- Performance Chemicals Segment Spin-off, dupont.com [↩]