What does the dissolution of DowDuPont mean for Dow's industrialists?

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S & P Dow Jones indices should replace
DowDuPont

(ticker: DWDP) in the
Dow Jones Industrial Average
with its Dow Inc. component, the index will lose the influence of a long-time member, DuPont. In one form or another, DuPont was part of the venerable index of 30 stocks since 1935. The decision was announced Tuesday.

Dow Chemical

merged with E.I. DuPont of Nemours and Co. formed DowDuPont in August 2017 and the new company replaced DuPont with DJIA.

DowDuPont is planning a tripartite split starting next week with the Dow split in a separate company, followed by the split of an agricultural company called Corteva in June. The remaining company will call DuPont.

This decision amounts to approval of the new Dow, which will achieve a turnover of nearly $ 50 billion, double that of the new Dupont.

Much of Dow's business will be in basic chemicals, while DuPont will be primarily specialty chemicals and will likely have a higher valuation than earnings.

Dow will operate in three core businesses: packaging and specialty plastics, polyurethanes and industrial solutions, as well as performance materials and coatings. It manufactures plastics and other products that are incorporated into a range of packaging, as well as resins and other chemicals found in paints.

Although Dow and DuPont Heritage have redistributed assets since the merger, the chemical companies that will emerge independently are similar to the original ones.

DowDuPont, whose shares are trading today at $ 52.50, down 1.3%, will sell a new Dow stock on three DowDuPont shares on Monday, April 1st. Dow is expected to negotiate separately on April 2.

Essentially, the S & P Dow Jones Indices Index Committee decided that the new Dow was more representative of the chemical industry and the basic materials sector than the new DuPont.

"We were looking at different parts and their place in the index and in the economy," says David Blitzer, head of the index committee at S & P Dow Jones Indices. Barron's. "We did not hang on to one name or another."

Based on the transactions at the time of issuance, Dow will be one of the smaller DJIA components, with a market value of approximately $ 38 billion. Dow trades Wednesday at $ 49.66, up 1.7%. DuPont's new market value should be higher than Dow's.

Write to Andrew Bary at [email protected]