DWDP (NYSE:DWDP) continues to be one of the fund’s largest positions. We remain confident in the underlying business fundamentals and CEO Ed Breen’s plan to create value. Despite a series of positive developments following the merger’s close last August, the discount to intrinsic value has widened. Several prominent sell-side analysts have noted the similarities between DWDP’s three future spins (Materials Co, Specialty Co, and Ag Co) and three publicly traded peers: LyondellBasell, 3M, and Monsanto. Consensus 2020 EBITDA for DWDP is $23 billion – coincidentally the sum of 2020 estimates for LYB, MMM and MON is nearly identical at $22.5 billion. However, the combined enterprise value for these three companies is $234 billion, about 40% higher than DWDP’s current enterprise value of $167 billion. Simply applying a similar EV to DWDP (which we believe is justified) implies a stock price of $92, nearly 50% higher than current levels. We expect this value gap to close over the next 12 months as synergies are realized and the three spin-offs are finalized.
From Daniel Loeb (Trades, Portfolio)'s first quarter 2018 shareholder commentary.
