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DuPont Buys Rogers Corp. For $5.2 Billion, Tops Q3 Earnings Forecast, Lowers 2021 Guidance

DuPont expanded its reach into the electric vehicle market with a $5.2 billion takeover of engineering materials maker Rogers Corp. alongside stronger-thane-expected third quarter earnings.

DuPont de Nemours  (DD) - Get DuPont de Nemours, Inc. Report posted stronger-than-expected third quarter earnings Tuesday and confirmed plans to buy engineering materials maker Rogers Corp. ROG for around $5.2 billion.

DuPont said adjusted earnings for the three months ending in September were pegged at $1.15 per share, an 89% increase from the same period last year and 3 cents ahead of the Street consensus forecast. Group revenues, DuPont said, rose 18% to $4.3 billon, again topping analysts' estimates of a $4.14 billion tally.

The group also said it had reached an agreement to buy Rogers Corp. for $277 per share for Chandler, Arizona-based Rogers, a 33% premium to last night's close that would value the group at just over $4 billion. DuPont also said it would divest a "substantial portion' of its mobility and materials segment.

Looking into the final months of the year, DuPont said it sees sales in the region of $16.3 to $16.4 billion, down from its August mid-point forecast of $16.5 billion, and adjusted earnings of between $4.18 and $4.22 per share, down from a mid-point forecast of $4.27 per share. 

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"With today's announcements, we are sharpening our focus on high-growth, high-value opportunities in sectors with steady long-term secular growth trends where our global innovation leadership enables a competitive advantage," said CEO Ed Breen. "Moving forward, our portfolio will be centered on key pillars – electronics, water, protection, industrial technologies and next generation automotive."

"We are committed to investing in each of these pillars organically and through strategic acquisitions to maximize our capabilities in areas that enable our customers to grow by delivering next generation technologies and sustainable high value-added solutions," he added. "These strategic steps are expected to create tremendous opportunities for DuPont and Rogers employees and unlock significant value for shareholders."  

DuPont shares were marked 4.5% higher in early trading immediately following the earnings release and takeover confirmation to  change hands at $74.50 each. 

Rogers shares, meanwhile, surged 30% to $269.58 each. 

"Overall, we view the totality of the news as a positive for DuPont shares, especially the divestment of mobility & materials," said KeyBanc Capital Markets analyst Aleksey Yefremov. "Such a transaction would create a more streamlined portfolio and reduce conglomerate discount in DuPont shares."

"While Rogers appears a promising acquisition, one that could accelerate DuPont's growth rate, we believe additional information would be needed for investors to get comfortable with the high deal multiple of 23.5x '21E EV/EBITDA," he added.