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Dow Chemical Completes Sale of Corn Seed Business

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Dow Agro Sciences’ corn seed business

On December 1, 2017, Dow Chemical, a subsidiary of DowDuPont (DWDP) announced the completion of the sale of a portion of Dow AgroSciences corn seed business in Brazil to CITIC Agri Fund. The deal was announced on July 11, 2017, and aims to facilitate the merger between Dow Chemical and DuPont.

The sale was valued at $1.1 billion and included seed processing and seed research plants, a copy of Dow AgroSciences Brazilian corn germplasm bank, the Morgan seed brand, and the Dow Sementes brand for a specified period.

This divestiture of assets had generated revenues of $287 million in 2016. The completion of the sale of this business helps DowDuPont one step closer to the intended spin-off of its agriculture company.

DowDuPont had earlier announced that the intended spin-off is expected to be completed within 18 months of the date of the merger between Dow Chemical and DuPont. The merger was completed on August 31, 2017.

Stock update

DowDuPont stock fell 0.20% and closed at $71.04 last week (ended December 1, 2017). Despite this stock fall, DWDP was trading marginally above the 50-day moving average price of $70.90. Since the listing of the stock on September 1, 2017, DWDP has gained 6.6%.

Analysts expect a further upward trend in the stock and have recommended a target price of $80.20. This implies a return potential of 12.90% over its closing price as of December 1, 2017. DWDP’s RSI (relative strength index) level of 51 indicates that the stock is neither overbought nor oversold.

Notably, investors can indirectly hold DWDP by investing in the Materials Select Sector SPDR Fund (XLB), which has 24% of its total portfolio in DowDuPont. XLB’s other holdings include Monsanto (MON), Air Products and Chemicals (APD), and Praxair (PX), which had weights of 7.9%, 5.4%, and 6.7%, respectively, as of December 1, 2017.

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