The 2017 merger between Dow Chemical and DuPont created DowDuPont (DWDP) as the world's largest chemical company (followed by the German behemoth BASF (OTCQX:BASFY)). Net sales are in excess of $80 billion with global divisions in agriculture, material science, and specialty products. Importantly for investors, the company plans to separate into three separately traded public companies by June 2019. The companies will be organized by separating out the current agriculture, material science, and specialty products divisions. Management projects $3.3 billion in cost synergies and another $1 billion in growth synergies from the restructuring. The potential opportunity here warrants a closer inspection of the investment thesis. Namely, that there is untapped shareholder value from this restructuring that could deliver outsized returns to shareholders over the next year or two.
Current Financials
Year-to-date stock performance has lagged the S&P 500 despite continued solid financial results. Financial highlights from Q1 2018 include year-over-year EPS growth of 7%. This was highlighted by overall 5% growth in sales. The Material Science division demonstrated a 17% increase in sales to $12 billion with double-digit gains in all sections. First-quarter operating EBITDA also grew an impressive 23% to $2.6 billion. Meanwhile, the Specialty Products segment also demonstrated an impressive 11% growth rate to $5.6 billion in total sales along with EBITDA growth of 25 percent to $1.6 billion. The agricultural business, however, suffered some weather-related declines, dragging down overall performance. Nevertheless, total operating EBITDA for the company as a whole increased 6% to $4.9 billion. Additionally, nearly $2 billion was returned to shareholders during the quarter in the form of dividends ($0.9 billion, 2.2% dividend yield) and share buybacks ($1 billion).
