Is DuPont worth more whole or in pieces?

Ellen Kullman is the first female CEO of Wilmington-based DuPont company and remains popular in her home town.

For a brief time in the 1950s, DuPont Co., the Wilmington-based global chemical products company, was the most valuable firm on the New York Stock Exchange. (For most of that period General Motors Corp. was the biggest, and also under du  Pont family control; but that's another story.)

But today DuPont, after years of asset sales and shifts into developing-country farm chemicals and energy products, and directed by popular hometown chief executive Ellen Kullman, survives as one of the least-valuable (by market cap) of the Dow-Jones 30 industrial stocks. Which means it's takeover bait. Or at least a candidate for chipping off assets and raising cash. Which is why shares last week jumped to a 12-year high of over $57 after CNBC reported that activist investor Nelson Peltz (Trian Fund Management) was buying up shares. Even though Peltz wouldn't confirm. 

"The most obvious question is if there is potential to unlock value from a break-up," wrote Citi Research analyust P.J. Juvekar in a report to clients. DuPont shares have been "essentially flat" since the late 1990s, while Monsanto, PPG and other chemical makers have gained value, he points out.

Broken in pieces, DuPont is worth maybe $66 billion, or $63 a share, writes Juvekar -- not much of a reward for all that breakup hassle. He figures DuPont ag products, discounted a bit to Monsanto, are worth $31 billion, performance chemicals (Titainum Dioxide) and performance materials at about $11 billion each, safety-and-protection and nutrition-and-health at $8 billion each, electronics and biosciences at $3-4 billion each. And even attractive units like TiO2, which could find a buyer, is throwing off enough cash to make Kullman unwiling to sell without a fat premium. Result: Citi is neutral on the stock, even at $55. 

So what would an activist raider want? How about cash: DuPont already pays nearly hafl its profits into divends which add 3 percentage points to yearly returns. "However, DuPont has a clean balance sheet and net debt/cap of only 26%, suggesting room for possible re-leveraging," writes Juvekar. Or will Uncle Dupie be tempted to buy more, to keep from getting bought?

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