US-based chemicals firm DuPont is planning to spin-off its Performance Chemicals segment, which includes the Titanium Technologies and Chemicals & Fluoroproducts (Teflon) businesses. It intends to execute the separation through a tax-free spin-off to shareholders, subject to customary closing conditions. Upon completion of the separation in about 18 months (by 2015), 100% of the new public entity will be owned by DuPont shareholders.

Though the Performance Chemicals segment generated about US$7 billion revenue and pre-tax operating profits of US$1.6 billion last year, its third-quarter profits in 2013 dropped 38% to US$254 million, the company reported earlier this week.

“Following a thorough strategic review process over the last year, the spin-off of Performance Chemicals is clearly the best option to deliver enhanced value for our shareholders. This separation will advance the transformation of DuPont and result in two strong, highly competitive companies,” said DuPont CEO Ellen Kullman. “Our strategy is already delivering strong results. After separation, DuPont will have the optimum portfolio and will benefit from more consistent earnings growth and lower volatility, enhancing our ability to deliver more sustained growth and invest in future opportunities. Performance Chemicals will emerge as a top global industrial chemicals company with industry leading products and strong cash flow.”

According to Kullman, new products were DuPont’s “lifeblood”, and the titanium dioxide pigments business, which is the largest component of the division being spun off, did not offer much scope for innovation.

The spin-off is part of a restructuring of the group since 2010 and follows the US$4.9 billion sale of DuPont’s performance coatings business, which makes paint for cars and other industrial uses, to Carlyle, the private equity group, in February. DuPont also acquired Danisco, a leading food and biosciences business.

Kullman said the company decided to spin off rather than sell the performance chemicals division in order to expedite the separation by cutting out potentially protracted negotiations with buyers, and to avoid the tax charge that would have been created by a sale.

DuPont announced on July 23 that it would explore strategic alternatives for its Performance Chemicals businesses because of slow growing and volatile earnings. The Performance Chemicals business includes titanium dioxide technologies, fluorochemicals and fluoropolymers, sulphuric acid, sodium cyanide, hydrogen cyanide, aniline, methylamines and dimethyl ether. Key end markets include plastics and coatings, textiles, mining, pulp and paper, water treatment and health care.

The move to spin-off the unit allows DuPont to refocus its resources on core businesses in agriculture and nutrition, as well as bio-based and advanced materials, say analysts.