DuPont May Rethink Performance Chemicals Spin-off Mode

Reports surfacing after DuPont's remarks at the Goldman Sachs Basic Materials conference on May 21 suggest the US chemical giant may be rethinking the planned spinoff to shareholders of its $7.2 billion Performance Chemicals division.

In October 2013, DuPont announced plans for the spin-off of the business that includes the white pigment titanium dioxide (TiO2) as well as fluorochemicals and polymers.

While saying that the process is still on track for mid-2015, chief financial officer Nicholas Fanandakis told the conference that the group is considering alternatives to a conventional spinoff to shareholders.

Instead, he said, it may consider a so-called Reverse Morris Trust transaction with TiO2 producer Tronox - a 2006 spin-off from the former Kerr McGee. Another alternative could be an outright sale of the division with $36 million in sales in 2013.

An RMT transaction combines a spin-off with a statutory merger to allow a tax-free transfer of a subsidiary. If DuPont takes the RMT route, analysts said there could be an opportunity for Tronox to be the target merger partner.

All of the market's players have suffered from lower prices and higher costs for some time, and a merger would create more critical mass. However, DuPont is the market's biggest player with a share of 20%, and Tronox, whose portfolio is based to 85% on TiO2, is regarded as the number 2 player in the $14 billion TiO2 market, so there could be anti-trust issues.