DuPont Sells Paint Unit, Will Cut “Overhead” Later (DD, CG, APO, KKR, SYT)

Following a months-long auction process, E.I. du Pont de Nemours and Co. (NYSE: DD) has agreed to sell its performance coating unit (DPC) to the Carlyle Group (NASDAQ: CG) for $4.9 billion in cash. DuPont kicked off an auction process for the unit back in January, and other bidders included Apollo Global Management LLC (NYSE: APO) and a group led by KKR & Co. L.P. (NYSE: KKR).

DuPont also sold its professional insecticide unit to Syngenta AG (NYSE: SYT) yesterday for $125 million in cash.

The coating unit, which primarily sold auto paint, was one of DuPont’s lowest margin businesses and Carlyle believes that it can turn the business around:

Through targeted investments we will support DPC’s product development and growth objectives as it transitions to a stand-alone company. We look forward to working with management to fully realize DPC’s great potential. … DuPont Performance Coatings is a technology innovator and we look forward to building on its strong market presence to accelerate growth in emerging markets, particularly in China and Brazil.

For its part, DuPont had this to say:

After a careful review …, we have determined that DPC’s full growth potential would be best realized outside DuPont and through the sale to Carlyle. This transaction is consistent with our vision to be the world’s most dynamic science company and long-term strategy of driving competitive advantages in agriculture and nutrition, advanced materials and biotechnology, which represent high-growth, high-margin opportunities.

DuPont also said that the company “plans to eliminate general corporate overhead costs that were previously allocated to DPC but are not part of the transaction.” That sounds very like a layoff announcement, and DuPont said it would provide details at its next earnings announcement, which is scheduled for October 23.

DuPont’s shares are up about 1.4% in premarket trading this morning at $50.65 in a 52-week range of $37.10 to $57.50.

Shares of Carlyle are up about 0.8% at $26.00 in a 52-week range of $20.00 to $26.00.

Paul Ausick