While it has been a long time coming, and it is unclear whether COVID hindered or helped, the DuPont materials exit is not a surprise and we noted after the IFF deal that we believed that Ed Breen was not done. During his time at Tyco, Mr. Breen showed a very clear ability to identify better owners for businesses that were lost in a conglomerate structure. We had always anticipated the same with DuPont and the business that is moving to Celanese is one we had expected to move and we had discussed previously. This should be a win for both companies as DuPont begins to look much more like a stable margin specialty chemical company with a portfolio that is becoming more ESG centric – see today's daily – while Celanese now has a large and comprehensive portfolio of polymers that are critical to the transport sector and should be able to drive both revenue and cost synergies if the company manages the integration well.
Source: Celanese Investor Presentation – DuPont M&M Transaction, February 2022
The risk for Celanese is that this is a very large deal and on the heels of the ExxonMobil polymers purchase and tackling two significant portfolio integrations at the same time is never easy. We have seen plenty of examples of companies that have not managed business integration well, resulting in higher costs rather than lower ones. That said, this is Celanese’s opportunity to lose and we suspect that the focus will be in the right places and they have hired the right help to get it done. Celanese is likely picking up assets that have been very well maintained and very strong technology and R&D backbones, albeit possibly a bit bloated. One challenge that Celanese may face is a very strong DuPont culture and the trick will be finding the best aspects of both cultures and merging them so that no one feels the changes are too much of a distraction. Our experience of integrating businesses is that it can only happen well if the leadership team is very engaged in the process – Ms. Ryerkerk and her team will need to spend a lot more time in the Northeast.
