DuPont to Buy more Electronics, Sell Plastics

03.11.2021 - Confirming reports leaked to the newspaper Wall Street Journal a day earlier, DuPont on Nov. 2 said it has signed a definitive agreement to acquire electronics materials specialist Rogers Corporation for $5.2 billion. This, the Delaware-based group said, will expand its leading position in high growth markets such as electric vehicles, advanced driver assistance systems (ADAS), 5G telecommunications and clean energy.

The transaction is expected to close in the second quarter of 2022, subject to customary closing conditions, including approval by Rogers shareholders and receipt of applicable regulatory approvals.

Parallel to acquiring Rogers, DuPont plans to divest a “substantial portion” of its Mobility & Materials segment, including the remaining activities linked to its signature invention, nylon. On the sale block are the businesses of its Engineering Polymers and Performance Resins division with annual sales of $2.2 billion, the Performance Resins with $1.15 billion in sales, along with the company’s stake in the DuPont Teijin Films joint venture.

Brands affected will be DuPont’s Zytel specialty nylon/PPA, its Crastin PBT, its Rynite PET and its specialty nylon-based monofilaments, along with its Delrin POM, Hytrel thermoplastic polyester elastomers and Vamac ethylene acrylic elastomer, in addition to its PVF films. Combined, the activities up for grabs represent some $4.2 billion in sales revenue and about $1 billion in operating EBITDA, based on estimates for full-year 2021.

DuPont said it anticipates a three to six-month process to market these businesses. Here, it is eyeing the 2022 fourth quarter to wrap up the divestments. Along with paying for part of the Rogers acquisition, proceeds from the asset sale are planned to be used for other M&A transactions and to maintain a balanced capital allocation.

Business focus shifts from chemicals to electronics

The erstwhile chemical giant is increasingly putting its historic past behind it. DuPont said the planned moves will strengthen its positions in high-growth, high-margin markets with a focus on electronics, water, protection, industrial technologies and next generation automotive, while accelerating top-line growth, strengthening operating EBITDA margins and significantly improving cross-cycle earnings stability.

“With today’s announcements, we are sharpening our focus on high-growth, high-value opportunities in sectors with steady long-term secular growth trends where our global innovation leadership enables a competitive advantage,” said DuPont CEO and executive chairman Ed Breen.

Building on the recent acquisition of Laird Performance Materials for $2.3 billion this past July, Breen said the acquisition of Rogers “further cements our position as the leading electronic solutions provider in the industry.” He added that that DuPont’s management “is committed to investing in each of these pillars organically and through strategic acquisitions to maximize capabilities. “

Based in Chandler, Arizona, Rogers designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components through its Advanced Electronics Solutions (AES) and Elastomeric Material Solutions (EMS) segments. With a workforce of more than 3,500 and a global network of 14 manufacturing sites in North America, Europe and Asia, the company expects sales revenue of $950 million this year.

Taking the Laird and Rogers acquisitions together, DuPont expects to realize around $115 million in pre-tax run-rate cost synergies by the end of 2023. The latest deal should to be accretive to its top-line growth, operating EBITDA, free cash flow and adjusted EPS upon closing, the CEO said. The enterprise value multiple of the transaction, he added, is about 19 times estimated fiscal 2022 EBITDA on a stand-alone basis and approximately 14 times including cost synergies.

Author: Dede Williams, Freelance Journalist