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DuPont has agreed to buy Laird Performance Materials, an electromagnetic shielding products maker, in a cash deal worth $2.3 billion from a private equity firm, Advent International. Shares of the technology-based materials and solutions provider rose 1.6% to close at $75.20 on March 8.
DuPont (DD) is looking to fund the acquisition through existing cash on hand. The deal, which awaits regulatory approvals, is expected to close in the third quarter of this year.
Upon closure of the deal, DuPont expects to record pre-tax run-rate cost synergies of $60 million by the end of 2024, the majority of which is likely to be realized in the first 18 months. After adjusting for one-time estimated costs of $40 million to achieve cost synergies and deal-related amortization, the deal is expected to be accretive to operating EBITDA margins, free cash flow, and adjusted EPS within the first 12 months. Moreover, single-digit ROIC is anticipated within five years. (See DuPont stock analysis on TipRanks)
DuPont CEO Ed Breen said, “Laird Performance Materials is a strategic and complementary addition to the Electronics & Industrial (E&I) business, and our applied material science expertise together with Laird Performance Materials’ industry-leading application engineering capabilities further strengthens DuPont as an essential partner for major electronics OEMs and manufacturers.”
Additionally, DuPont’s board of directors approved a new $1.5 billion share buyback program, which will expire on June 30, 2022. As of Dec. 31, 2020, the company had $1 billion of shares available under its existing share repurchase program.
On Feb. 3, Wells Fargo analyst Michael Sison trimmed the stock’s price target to $87 (15.7% upside potential) from $95 and maintained a Buy rating following “the split-off of the N&B business.”
Sison believes “DuPont remaining company has a high-quality portfolio of businesses, which offers strong leverage to high performance polymers and resins that can replace other materials with superior performance, technology advancements needed in the semiconductor industry and engineered products focused on safety and health needs of a variety of industries.”
Further, the analyst noted, “DuPont remains undervalued given his growth expectations for semiconductor manufacturing, and the underlying quality of its T&I and S&C businesses, which have previously traded in-line with commodity chemical multiples.”
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 analysts suggesting a Buy and 6 analysts recommending a Hold. The average analyst price target of $83 implies a 10.4% upside potential to current levels. Shares have jumped almost 30% over the past six months.
DuPont scores an 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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