Slow Spin Coming- New Dow Is Living In A Materials World, Starting April 1

A title pairing Robert Zimmerman and Madonna Louise Ciccone- too much? No matter, we’re having fun. DowDuPont(DWDP) is as well, with two spins coming up, the first in just weeks. It was just 36 months ago that Dow and DuPont announced their merger, and just 18 months ago when it closed. All along, they intended to split into three companies, after shuffling assets around. And here we are.

On March 8, 2019, DowDuPont announced that is Board of Directors had approved the spinoff of its Materials Science division as the New Dow.  On April 1, DowDupont shareholders of record as of March 21 will receive one share of Dow stock for every three shares of DowDupont stock they hold.

“The new Dow is a more focused, disciplined and market-oriented company,” said Jim Fitterling, chief operating officer of the Materials Science division and chief executive officer elect of Dow. “We are fully prepared for our separation from DowDuPont on April 1, and ready to innovate and grow with our customers while delivering long-term value for our shareholders.”

Dow and the new DuPont both have declared dividends for the second quarter. DowDuPont CEO Ed Breen, who will continue as CEO of DuPont also noted that the company will spin off Corteva Agriscience on June 1. Dow will also begin repurchasing up to $3 billion in stock beginning immediately after the transaction. Dow stock will trade under the DOW ticker symbol.

The company’s Form 10 has been declared effective, and Dow stock is already trading on a when-issued basis. The company also prepared a pre-spin investor roadshow presentation on the new Dow.

Barron’s discussed the DowDuPont split as being a poster child for the current zeitgeist of breaking up conglomerates. In another article, it analyzed the value of the breakup, concluding that the breakup would do little to immediately unlock value.

Reuters had an interesting article speculating as to how the Dow Jones Index might address the breakup of DowDuPont, which is a component. Will one of the three successor companies remain, or will the managers of the index add an entirely new stock? How will S&P deal with the split?

There is sure to be a great deal of interest in discussion about this long-awaited spinoff in the weeks and months to come.

Disclosure: The author holds no position in any stock mentioned