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Stock Strategist

DuPont Gets Better End of Deal

We think its divestment to IFF makes good strategic sense.

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DuPont (DD) plans to merge its nutrition and biosciences business with International Flavors & Fragrances (IFF) on terms that appear slightly favorable for DuPont shareholders. Our updated $95 fair value estimate for DuPont assumes a 100% probability that the deal will close, as we see little overlap between the two portfolios, as well as a significant cut in the proposed synergy targets. We currently view DuPont as significantly undervalued.

Under the terms of the deal, DuPont shareholders will receive a 55.4% equity stake in the merged company, and DuPont will receive a $7.3 billion dividend payout from the merged company when the transaction closes, which we expect will be by early 2021. Based on our valuation, DuPont is effectively receiving an 18.4 times presynergy multiple, which we view as an attractive valuation.

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Seth Goldstein does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.