DWDP - Dow DuPont

[BG2008]

 

 

 

 

(Bloomberg) -- DuPont de Nemours Inc. and Teijin Ltd. are trying again to sell a joint venture that makes chemical films used in solar panels after an earlier deal fell through, people familiar with the matter said.

 

The firms are working with financial advisers to help with a disposal of the business, said the people, who asked not to be identified because the discussions are private. The joint venture could fetch about $1 billion in a sale, the people said.

 

DuPont and Teijin announced they would sell all their equity interest in the films business to Indorama Ventures PCL in 2017. The terms of the transaction weren’t disclosed at the time. That deal was never completed, though, the people said.

 

The companies have now restarted the auction process with management presentations for potential buyers, the people said. It’s possible this time that an agreement might not be reached, or the companies may again end up keeping the business, they said.

 

A spokesman for Japan-based Teijin, said no decision has been made on selling the joint venture and declined to comment further. A representative for DuPont, based in Wilmington, Delaware, declined to comment.

 

DuPont has been transforming itself following the breakup of DowDuPont, the chemical giant created in a 2017 mega deal, through a series of divestitures.

 

DuPont Teijin Films is a 50-50 global joint venture between the two companies. It makes high-end polyethylene terephthalate films used for medical equipment, as well as solar panels.

 

So maybe $0.5bn for the JV if they own 50% of it. 

 

 

[BG2008]

I gave in a bought a little more today. You only live once.

 

Greg, I own a decent position.  Look at the $65 Jan 2021 LEAPs.  Seems like IFF JV will almost be done by then and maybe you'll wind up with a basket of 4 different companies or the market will at least start pricing that in.  The SOTP discount should not exist in this case, because they are actually breaking all the parts apart.  This was something that I did not appreciate as much about Cannae Holdings (formerly FNFV).  When it trades at a discount, they will actually sell.  When the stakes in the public company they own goes up in value, they actually sell those shares and use it to buy back. They distributed ownership in other companies.  So over time, the SOTP discount disappears. 

[Gregmal]

I gave in a bought a little more today. You only live once.

 

Greg, I own a decent position.  Look at the $65 Jan 2021 LEAPs.  Seems like IFF JV will almost be done by then and maybe you'll wind up with a basket of 4 different companies or the market will at least start pricing that in.  The SOTP discount should not exist in this case, because they are actually breaking all the parts apart.  This was something that I did not appreciate as much about Cannae Holdings (formerly FNFV).  When it trades at a discount, they will actually sell.  When the stakes in the public company they own goes up in value, they actually sell those shares and use it to buy back. They distributed ownership in other companies.  So over time, the SOTP discount disappears.

 

I'm curious, why the $65?

 

I guess expanding a little further, why over vs under? I have not gotten comfortable enough with the value to really go after structuring a trade like this, but would probably look at the $45 calls and if anything, adding a little something via shorting similarly dated LEAP puts, at or slightly out of the money. Just a quick glance the Jan 21 $45s are probably costing you $2-3 in premium vs going out to the $65s, in a vacuum you need the stock to do $10 from here for breakeven. Might I be missing something with regard to adjustments needing to be made for all the transaction going on? I know sometimes the options can get greasy when you have a lot of corporate actions. But all else equal I typically like to go a bit further down in the money to give myself a bit of room to be wrong. One of my best trade ever I recall was in Q1 2016 I had some Citi $50 calls that were in the money and then subsequently Citi dumped to like $39 in February. Long story short I still thought $50 was still good and bought an absurd amount of calls for maybe a $1 or $2 and by expiration Citi was over $60. Structuring is very important. Right now I just own the stock with about a ~1.5% position.

 

EDIT: I was looking at Jan 2022s. But same question stands.

[BG2008]

For me, mostly because I own a decent position already.  Going OTM allows me to pick up quite a bit of exposure without adding a ton of capital.  Going ITM results in lower premium, but less overall exposure.  I bought some Berry Calls and LEAPs when it traded to the $37-38 range.  I bought the $45 and $47.50 calls and LEAPs.  Those are mostly ITM now.  It's kind of how my brain is wired.  I generally think if the re-shuffling of companies will reveal a price in the $80s-90s, then paying $3 for the $65 will likely serve you well.  Heck, who knows, maybe some of that cyclical actual grows for a change.  Although with the Corona Virus, it looks like it may not.  But there are literally rumors from Bloomberg that this company will be split into 4. 

 

Nothing is sacred at Ed Breen's DuPont. 

[Gregmal]

Well, Ill get $55 today(maybe a touch cheaper). All in all, a very Dupont like Q. Not narrative changing. Just meh... I dont mind this gravitating towards cheaper though, given my current ability to find value in abundance in this market is limited.

[Spekulatius]

Sold mine before the open today. Took an ~8% loss. I will evaluate this again in a month . Thesis seems broken as I didn’t like blurb about  pricing pressure at all. Looks like dead money or worse for a while. Live and learn. Sorry guys :(

[Gregmal]

Sold mine before the open today. Took an ~8% loss. I will evaluate this again in a month . Thesis seems broken as I didn’t like blurb about  pricing pressure at all. Looks like dead money or worse for a while. Live and learn. Sorry guys :(

 

You're probably right and I'd likely have the same approach if I was looking at this trying to make money today or this week. Im perhaps influenced as well by the slim pickings with respect to the overall market. I dont think this will ever be a super aggressive position, but theres some good stuff(assets) here, some mediocre stuff, and probably a good bit of accumulated corporate sludge picked up over the decades that can be "refined" so to speak. Will see.

[BG2008]

Sold mine before the open today. Took an ~8% loss. I will evaluate this again in a month . Thesis seems broken as I didn’t like blurb about  pricing pressure at all. Looks like dead money or worse for a while. Live and learn. Sorry guys :(

 

Probably dead money for 1 year, likely decent outcome in 2-3 years after they reshuffle all the different pieces.  Not a fan of the pricing pressure talk today.  What price did you sell for Spek?

[LC]

Sold mine before the open today. Took an ~8% loss. I will evaluate this again in a month . Thesis seems broken as I didn’t like blurb about  pricing pressure at all. Looks like dead money or worse for a while. Live and learn. Sorry guys :(

 

For what it's worth I left about 10% on the table with 3M. I think your thesis (which I share) is generally correct/ The guy on the scale looks fat to me. Timing was just off. Correct process, unfortunate outcome. It happens.  ;D

[Spekulatius]

Sold mine before the open today. Took an ~8% loss. I will evaluate this again in a month . Thesis seems broken as I didn’t like blurb about  pricing pressure at all. Looks like dead money or worse for a while. Live and learn. Sorry guys :(

 

Probably dead money for 1 year, likely decent outcome in 2-3 years after they reshuffle all the different pieces.  Not a fan of the pricing pressure talk today.  What price did you sell for Spek?

 

My blended price is about $55.8. I sold premarket before the clock struck 7AM this morning after flipping though the earnings presentation. The key issues were:

 

1) weak guidance for 2020, which looks backloaded

2) volume losses and pricing pressure (note they raise prices overall)

3) They worked really hard to make the Q4 number palpable, but all KPI’s seems to be trending the wrong way

4) wheels coming of from the Tefjin JV business (which they intend to sell off)

 

I will look at this again after a month to follow wash sale rules, but I doubt I am going right back in, although that depends on prices. I definitely left with the impression that it’s not as good of a business than I thought when I bought in.

[Gregmal]

Big add for Lee Cooperman.

[Gregmal]

https://seekingalpha.com/pr/17781108-dupont-announces-leadership-changes

[dwy000]

Okay at $44.50 this is starting to look really interesting.

[BG2008]

Spek,

 

Any thoughts at these prices?  Would love to get your inputs.  I doubt many of us expected DD to trade here.  I bought some DD hedges and those paid out pretty well.  But I kept my shares as well. 

[undervalued]

Spek,

 

Any thoughts at these prices?  Would love to get your inputs.  I doubt many of us expected DD to trade here.  I bought some DD hedges and those paid out pretty well.  But I kept my shares as well.

 

What's the most effective way to hedge DD? I am trying to learn how to hedge other positions other than DD.

[Gregmal]

At this point, probably just position sizing or a pair trade. Options are insanely expensive. If the company will weather the storm, just take the pain at these levels. Ive danced around this a bit and as a result have now about a 2.5-3% position with a cost in the low $50s. I rule!

[Spekulatius]

Spek,

 

Any thoughts at these prices?  Would love to get your inputs.  I doubt many of us expected DD to trade here.  I bought some DD hedges and those paid out pretty well.  But I kept my shares as well.

 

I have no opinion right now. I don’t buy it back and quite frankly, unless a business is absolutely bulletproof, I am inclined to just wait a couple of month and see what the fundamental looks like post Covid-19.

 

Let face it, at $70, this wasn’t really cheap. It was only cheap relative to very bloated comps. It will be interesting to see how they hold up in a recession. I would particular look at retaining pricing power.

[BG2008]

IFF (NYSE:IFF) (Euronext Paris:IFF) (TASE:IFF) and DuPont (NYSE:DD) announced today that Nutrition & Biosciences, Inc. (“N&B”) has priced an offering of $6.25 billion of senior unsecured notes, comprised of the following tranches (collectively, the “Notes”): $300.0 million aggregate principal amount of 0.697% Senior Notes due 2022; $1.0 billion aggregate principal amount of 1.230% Senior Notes due 2025; $1.2 billion aggregate principal amount of 1.832% Senior Notes due 2027; $1.5 billion aggregate principal amount of 2.300% Senior Notes due 2030; $750.0 million aggregate principal amount of 3.268% Senior Notes due 2040; and $1.5 billion aggregate principal amount of 3.468% Senior Notes due 2050.

 

If this is what the debt capital market looks like, I think DD have 50-100% upside from here.  With Q2 out now, the auto business is a shitshow.  But the other 3 segments held up well.  Also divested a non-core business for $725mm

 

WILMINGTON, Del. Sep. 9, 2020 – DuPont (NYSE:DD) today announced it has

divested its trichlorosilane (TCS) business and its equity interest in the Hemlock

Semiconductor joint venture to Hemlock for $725 million. The deal has received

regulatory approval and was closed at signing. DuPont received pre-tax cash proceeds

of $550 million at closing and expects to receive additional pre-tax cash consideration of

$175 million over the next 36-months associated with the settlement of an existing

supply agreement dispute with Hemlock.

Based in Midland, Mich., the TCS business produces trichlorosilane, a key raw material

for Hemlock Semiconductor Operation’s production of high-purity polysilicon and other

industrial chemicals.

 

[Gregmal]

https://seekingalpha.com/pr/18063318-dupont-reports-third-quarter-2020-results

 

This has been quiet. Stock was in favor/popular for a bit, then went out of favor not coincidentally as it got really, really cheap...now its just humming along nicely.

[longlake95]

Anyone thinking of taking the exchange offer to convert into the nutrition & bio business, then into IFF. Since DD has run up so much and is get fully valued, may be moving into IFF which is much less cyclical maybe a good move. The other side of that is I'd lose Ed Breen as my CEO...

[Gregmal]

I swapped this into BRK today. Its probably still good, but when you get 50% inside a year on a stock like Dupont, and then see Berkshire just sitting there like the fat girl at the end of the bar......

[longlake95]

That's a good idea Greg. Thanks... I'll think about that...

 

Are the lights on in the bar?

[BG2008]

For me, mostly because I own a decent position already.  Going OTM allows me to pick up quite a bit of exposure without adding a ton of capital.  Going ITM results in lower premium, but less overall exposure.  I bought some Berry Calls and LEAPs when it traded to the $37-38 range.  I bought the $45 and $47.50 calls and LEAPs.  Those are mostly ITM now.  It's kind of how my brain is wired.  I generally think if the re-shuffling of companies will reveal a price in the $80s-90s, then paying $3 for the $65 will likely serve you well.  Heck, who knows, maybe some of that cyclical actual grows for a change.  Although with the Corona Virus, it looks like it may not.  But there are literally rumors from Bloomberg that this company will be split into 4. 

 

Nothing is sacred at Ed Breen's DuPont.

 

If you ask me a year ago that we will go into full lockdown and somehow DD will come out with a $77 print today, I would probably tell you you're smoking some good dope.  The $65 LEAPs are about $12-13 today.  That $3 LEAP premium allowed me to increase my exposure by about 80% while just increasing my capital outlay by about 5%. I think if you are a small manager or an individual, you should consider using LEAPs to size up your positions when they fall in price or stay stagnant for a while.  Okay, let's not jinx ourselves now!!! I have Berry and DD LEAPs that will both expire in about 9 days and they are both almost 4x at this point.  I remember talking to another manager back in Mar and April and thinking that DD will be worth about $100 in 2022-2023 and I can buy it at $28/$30.  That's a triple in 2-3 years.  Somehow, I only bought an incremental 5-10%.  Say whatever you want, these specialty chemical companies are amazing businesses. 

[Gregmal]

That's a good idea Greg. Thanks... I'll think about that...

 

Are the lights on in the bar?

 

Always on.

 

[dwy000]

I swapped this into BRK today. Its probably still good, but when you get 50% inside a year on a stock like Dupont, and then see Berkshire just sitting there like the fat girl at the end of the bar......

 

That was pretty funny.  And accurate.