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Rev. May 11, 2017
DuPont Corporation: Sale of Performance Coatings
In January 2012, Ellen Kullman, CEO and chairman of DuPont, was reviewing an internal report on the
company’s Performance Coatings division. A month earlier, she had dismissed rumors that the business was
up for sale after reports had surfaced that the company had hired Credit Suisse to seek potential buyers for it.
Kullman stated that the business would be given a “chance” to see if it could meet certain performance
targets, saying: “From a performance standpoint we will give them a chance to see if they can get there. If any
of our businesses can’t obtain their targets, obviously we will look at alternatives.”1 For several years, the
business, which produced paint for the auto and trucking industries, had struggled with low demand and high
raw-material costs that had hurt profits. During her tenure as CEO, Kullman had attempted to move DuPont
away from commodity chemicals to a specialty chemical and science–focused products business. It was no
longer clear whether DuPont Performance Coatings (DPC) fit her strategic vision for the firm. Still, the issue
was what course would produce the greatest value for shareholders. She had called for an internal review of
the business that fall to assess its value to DuPont compared to what outside parties might pay for it. Those
reports were now complete, and she would have to decide whether to retain the business or sell it and, if so,
at what price.
History of DuPont
E. I. du Pont de Nemours and Company was one of the longest continually operating companies in the
United States. It traced its origin to a French émigré, Eleuthère Irénée (E. I.) du Pont, who had studied
chemistry and who, at age 14, had written a paper on gunpowder. In 1799, his family fled revolutionary
France, and in 1802, he founded a company in Delaware, at the urging of Thomas Jefferson, to manufacturer
gunpowder.2 From its origins in gunpowder, in the 1880s, the company pioneered the manufacture of
dynamite. At the turn of the 20th century, the chemistry of nitrocellulose, critical to explosives, began to
spawn early innovations in plastics, lacquers, films, and fibers. In 1911, the U.S. government, citing antitrust
reasons, forced DuPont to break up its monopoly gunpowder business. Notwithstanding this, the company
made enormous profits during World War I, which it used to diversify into other businesses. By 2011,
DuPont was among the world’s largest chemical companies; it had $38 billion in sales and operations in 90
1Stefan Baumgarten, “DuPont CEO Slams News Media Over Reports of Coatings Business Sale,” ICIS News, December 13, 2011.
2Du Pont’s gunpowder company was capitalized at $36,000, with 18 shares worth $2,000 each, a portion of which was used to purchase a site on
Brandywine Creek for $6,740. Jefferson advised du Pont of the new nation’s need for gunpowder and gave him his first order, calling the agreement
between the two a “handshake that built a country,” from E. I. du Pont de Nemours and Company, “DuPont—200 Years of Service to the U.S.
Government in Times of Need.”
This case was prepared by Susan Chaplinsky, Tipton P. Snavely Professor of Business Administration; and Felicia Marston, Professor of Commerce,
McIntire School of Commerce; with the assistance of Brett Merker, Research Assistant. It was written as a basis for class discussion rather than to
illustrate an effective or ineffective handling of an administrative situation. Copyright  2014 by the University of Virginia Darden School Foundation,
Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced,
stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the
permission of the Darden School Foundation.
This document is authorized for use only in Hernán Herrera's Banca de inversión / 2020-2 nov. at Universidad EAFIT from Nov 2020 to May 2021.
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countries. Among its most well-known products were nylon (introduced in 1935), Tyvek (used in
construction), Kevlar (a protection product), and Teflon (a protective surface). Exhibit 1 shows the evolving
nature of DuPont’s businesses since its founding.
Kullman’s Watch
Kullman joined DuPont in 1988 as a marketing manager after starting her career at GE. Within DuPont,
she had a reputation for making businesses grow, a legacy she attributed to her father, who was a landscaper.
In 1998, she launched a safety consulting business, which later became the Safety & Protection business,
which boasted sales approaching $4 billion in 2011. She was named DuPont’s CEO in January 2009 and, later
that same year, chairman. That year was a difficult one for the company because its performance was closely
tied to the broader economy, which had fallen into a recession. Shortly after her appointment as CEO, in
February 2009, DuPont’s stock price fell below $19, a multiyear low (Exhibit 2). In response to the
downturn, Kullman cut costs, laid off 4,500 employees, and continued to transition the company from a
commodity chemical business to a specialty chemical and science–driven business. Commodity chemicals
typically were cyclical, and intense priced-based competition kept margins low. By moving toward specialty
chemicals and more customized products based on DuPont’s research and development (R&D), Kullman
hoped to focus the company on higher-growth and -margin businesses.
As part of this plan, the company acquired Danisco, a leading food ingredient and enzyme company, for
$7.1 billion in January 2011. It was the second-largest acquisition in company history, smaller only than the
1999 acquisition of Pioneer Hi-Bred International, a maker of genetically modified seeds. With the shift
taking place away from the “Old DuPont” to a more specialty-focused company, the drivers of growth over
the next few years were likely to be Agriculture, Nutrition & Health, Performance Chemicals, and the nascent
Industrial Biosciences businesses. Kullman saw the firm’s future increasingly at the core of industrial
biotechnology; the company was positioned to compete in agriculture, nutrition, and advanced materials. She
articulated her direction for the firm in the 2010 annual report:
We have attractive growth opportunities supported by market-driven science and fueled by global
megatrends associated with population growth. We are allocating resources to drive the highest
growth opportunities…Global population will pass the 7 billion mark in 2011 and exceed 9 billion
people by 2050—or about 150,000 more people on the planet every day. This will translate into
critical needs in the areas of feeding the world, reducing our dependence on fossil fuels and keeping
people and the environment safe—the megatrends that are driving our science and innovation….3
With her push to match the company’s focus to these megatrends, DuPont’s business units were
evaluated to determine whether they fit this vision and could meet the company’s performance goals. The
company had publicly stated that its longer-term performance goals were to achieve 7% sales growth annually
and 12% earning margins. The firm had eight separate business units: Agriculture (24% of 2011 sales),
Performance Chemicals (21%), Performance Materials (18%), Performance Coatings (11%), Safety &
Protection (10%), Electronics & Communications (8%), Nutrition & Health (6%), and Industrial Biosciences
(2%). Based on 2011 revenue, Agriculture had grown to be DuPont’s largest business (Exhibit 3). Although
there was some unevenness in growth over the past two years, most of DuPont’s divisions had been able to
grow sales in line with the 7% goal. This was also true of DPC, which, in rebounding from the lows of 2009,
had grown sales by 12.5% in 2011, but the growth rate in sales over the next two years was expected to be
3 DuPont, “Letter to Shareholders,” 2010 Annual Review, 2011, 2.
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only 3% to 5% (Exhibit 4). More concerning was that its profit margins were the lowest among the eight
businesses. All of this suggested that DPC would have to significantly improve its growth and profitability to
meet DuPont’s performance goals.
Performance Coatings
DPC was formed in March 1999 when Herberts GmbH and DuPont Automotive Finishes merged.4 Its
products included high-performance liquid and powder coatings for motor vehicle original equipment
manufacturers (OEMs), the motor vehicle aftermarket (refinishing), and general industrial applications, such
as coatings for heavy equipment, pipes and appliances, and electrical insulation.5 DPC employees liked to say
that the products they made didn’t make cars go faster, they just made them look good going faster. From
2007 to 2011, sales had grown at a –0.3% cumulative average growth rate (CAGR) and profits had declined at
a –6.0% CAGR (Exhibit 5). Due to the company’s exposure to the auto sector, sales and earnings had been
adversely affected by the 2008 and 2009 downturn. In 2011, the company posted stronger revenue growth of
12.5%, but most of this was attributed to price increases, which were unlikely to continue. Notwithstanding
the pickup in sales, operating margins remained muted because of rising input costs. Nearly 50% of the key
raw-material inputs (e.g., hydrocarbon solvents and organic pigments) were tied to crude oil prices, which had
risen since the middle of 2010 due to tight supply and improving economic conditions.
Key competitive factors in its business included technology and technical expertise, product innovation
and quality, breadth of product line, service, and price. In most industrial applications, the coating itself was
only a small part of total production costs (e.g., 10% to 15%), and most customers were willing to pay more
for technologically advanced coatings if it reduced application costs (e.g., labor). The industry in general was
also not highly capital-intensive—capital expenditures and R&D were relatively small in comparison to the
variable costs of production.
DPC held the number-four position in the global industrial coatings market, where it faced strong
competition in all the business verticals that made up the industry (Exhibit 6). The market was highly
fragmented: two companies—PPG Industries and Akzo Nobel N.V., each with sales greater than
$10 billion—together accounted for 25% of industry sales. Seventeen firms had sales between $1 billion and
$10 billion, the range of DPC’s sales, which accounted for 45% of sales. The remainder of sales came from
over 60 additional firms. Given the increased pressures for cutting costs and finding higher-growth
opportunities, over the last six years, the industry had been consolidating; the market share of the six top
companies increased from 28% in 2005 to 35% in 2011.6 The top-10 global competitors controlled 60% to
75% of the sales in U.S. and European markets. To varying degrees, all the top competitors saw opportunities
for growth in the less saturated Asia-Pacific and Latin American markets.
Relative to peers, DPC’s strengths were in refinishing and the vehicle OEM market. In 2011, the vehicle
aftermarket accounted for 43% of the division’s sales, down from 53% of sales in 2009. The decline in
refinishing was of concern because its profit margins tended to be higher than those in the vehicle OEM
market. Of the $7 billion global refinishing market, PPG and DuPont were the market leaders—each had
approximately a 28% market share—followed by Akzo Nobel (17% market share). Sales to motor vehicle
4 DuPont had been a supplier of paint to the U.S. auto industry since its infancy, providing paint to General Motors in the 1920s. Herberts, a
subsidiary of Hoechst, was acquired for $1.9 billion, making the combined firms the largest supplier of automotive finishes in the world. At the time,
80% of Herberts’s operations were in Europe, while 75% of DuPont’s business was in North America.
5 Sales to OEMs included all vehicles (e.g., cars, trucks, buses, and motorcycles).
6 Buckingham Research Group, PPG Industries: “Other” Industrial Coatings Review, May 21, 2012.
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OEMs accounted for 37% of DPC’s 2011 sales, and DPC held the number-three market position in the
OEM paint market behind PPG and BASF SE.
The two key drivers of revenue for these businesses were miles driven and vehicle sales. Miles driven was
correlated with the incidence of collisions, which affected the demand for paint from refinishing, and sales of
vehicles generated demand for paint from OEMs (Exhibit 7). Trends in the refinishing market were generally
steady to negative. In the past several years, the number of miles driven in the United States had tapered off,
resulting in fewer collisions. Potentially offsetting this trend was an expected increase in miles driven—and
relatedly, collisions—outside the United States.
Also reducing the demand for paint was a significant dropoff in the number of damaged cars that were
refinished. This was due to more damaged cars being written off (“totaled”) and insurance companies
imposing higher deductibles such that damaged cars more frequently went without repair. In the United
Kingdom, for example, an estimated 7% of damaged cars were written off in 2010 compared to 5% in 2000;
that translated to 80,000 fewer cars requiring repair (and paint) every year.7 Further, advances in the quality of
paint used by OEMs made it more durable and resistant to scratches and weathering.
The OEM market had experienced a sharp decline in global motor vehicle production in 2009 that had
since begun to recover (Exhibit 8). In 2011, North American vehicle production (13.5 million units) still fell
short of its 2007 level (15.5 million units). Over the past decade, most of the growth in vehicle production
had taken place in countries outside the United States, particularly in emerging markets. For example,
between 2000 and 2010, China and India had experienced an astonishing 763% and 344% increase,
respectively, in vehicle manufacturing. DPC’s existing customer base was heavily concentrated in Detroit, but
North America accounted for only 27% of its revenues. As vehicle manufacturing continued to grow outside
North America, DPC’s revenues would likely expand in those markets.
DPC’s overall revenues were closely tied to GDP growth, which was expected to be 1% to 2% in 2012–
13 in the United States, largely flat in Europe, and more positive but erratic in emerging markets. Most
analysts expected that emerging-market growth coupled with unprecedented fleet aging would spur a recovery
in vehicle sales on the order of 3% to 5% per year.8 Increases in sales, however, did not necessarily translate
into higher profits for several reasons. First, the OEM profit margins were set by multiyear contracts with
vehicle manufacturers, which made it difficult for paint suppliers to quickly pass on raw-material price
increases. By comparison, the margins in refinishing were primarily based on claims paid by insurance
companies, which left consumers less price sensitive to repair costs. Second, growing concerns about lead, the
high cost of treating airborne emissions and solid hazardous waste generated by paint operations, and new
regulations covering the global chemical industry in Europe were all expected to increase environmental
compliance costs gradually over time.
Although a bullish scenario could be concocted for DPC, industry trends suggested that stable to modest
improvement was the more likely course for the business over the next several years. As part of the internal
review, DuPont attempted to assess DPC’s value if it remained a division of the company. DuPont’s internal
targets for DPC were annual revenue growth of 3% to 5% and operating margins of 10% to 12%. Given
DPC’s mixed track record of performance, the internal review set targets at 4% for growth and 10% for
margins, the low end of the targeted range. Other assumptions underlying the stand-alone valuation were
7 Morgan Stanley, “E. I. du Pont de Nemours & Co.,” analyst report, February 13, 2012.
8 Morgan Stanley, 5.
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incorporated into the analysis itself (Exhibit 9) and together yielded a value of approximately $4 billion for
the division.
Potential Buyers
When news surfaced in late October 2011 that DuPont was seeking a potential buyer for DPC,
companies including PPG, BASF, Akzo Nobel, and Valspar Corporation were mentioned as prospective
strategic buyers. For all but BASF, a potential purchase price of $4 billion would be a sizable transaction to
complete (Exhibit 10). In response to a question about his company’s potential interest, Valspar CEO Gary
E. Hendrickson said that DPC was “a little too big a bite for us.”9 Although the $4 billion price tag would
also be large in the current environment for private equity (PE) firms, Blackstone, Advent International,
KKR & Co., Onex Corporation, and Clayton, Dubilier & Rice were all reportedly considering bids or had
already made inquiries about the division.10 The interest from PE firms was not surprising, given that buyout
firms were sitting on record levels of “dry powder” cumulatively totaling over $400 billion at the end of 2011.
A large portion of that was concentrated in buyout funds with 2006 and 2007 vintage years. In those years,
buyout funds had raised record amounts of capital but had found it difficult to invest in the ensuing crisis
years. As these funds neared the end of their investment periods, their general partners were under increasing
pressure to find investments.
A leveraged buyout (LBO) was the purchase of a firm facilitated by large amounts of debt financing. In
an LBO, the PE firm or sponsor would arrange debt financing for the deal and contribute the balance of
financing with equity from one or more of its funds. Because of the anticipated higher debt load, PE firms
generally looked for firms that could readily service the debt. Target characteristics might include steady and
predictable cash flows, assets that provided good collateral for debt, or non-core assets that could be sold to
pay down debt. Debt support (and returns) could also be bolstered if the targets had opportunities to grow
EBITDA by increasing sales or cutting costs. For similar reasons, sponsors looked for mature firms that did
not seemingly require large amounts of additional capital expenditures or R&D. Most sponsors also looked
for a strong management team because they typically were not hands-on operators and had to rely on the
target’s management to run day-to-day operations.
Of course, to make a good return, the sponsor had to increase the target’s value above its purchase price
over a typically four- to five-year period, after which it would seek to exit the investment. Sponsors in PE
deals generally looked to three factors to drive returns in their investee companies: benefits from the use of
leverage, growth in EBITDA, and multiple arbitrage (i.e., buy at a low multiple and sell at a high multiple).
Benefits of leverage
One benefit of leverage was that interest on debt was tax deductible and therefore the cost of debt was
lower than the cost of equity. As a result, increasing leverage could produce interest tax shields that enhanced
the company’s value. The use of leverage could also help augment a sponsor’s returns, because for a given
price paid for the business, more debt financing directly translated to a smaller equity contribution. All else
equal, the smaller the equity base, the higher the return. Additionally, as equity holders, the sponsors received
their share of the difference between the selling price (i.e., enterprise value of the firm at exit) and the equity
9 Doug Cameron, “Valspar: DuPont Coatings Business Too Big a Bite for Us to Buy,” Wall Street Journal, May 14, 2012.
10 At the same time, DuPont hired Greenhill & Co. to handle the sale of a smaller part of the business that handled coatings for tractors and
playground equipment. Zachary R. Mider and Jeffrey McCracken, “DuPont Is Said to Weigh $4 Billion Sale of Auto-Paint Unit,” Bloomberg, October
28, 2011.
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value remaining after the debt and other senior claims were paid off. In a highly leveraged company, a
relatively small increase in the firm’s enterprise value could lead to a substantial increase in the sponsor’s
equity value. But high leverage also increased the sponsor’s risk, since, analogously, a relatively small decline
in enterprise value could materially reduce the value of its equity. High leverage could also be instrumental in
driving returns for another reason—high interest and principal payments helped focus management’s
attention on improving performance and operating efficiency to generate cash for debt service.
DPC as a stand-alone company was expected to be all equity financed, and therefore the use of leverage
was a potential source of value for PE sponsors. Sponsors typically spoke to bankers ahead of a deal to gauge
how much debt might be available to finance the transaction. The total financing that would have to be raised
depended on how much the sponsors paid for the target. Given its size, DPC would be considered a large
buyout, which was generally defined as a deal above $1 billion in size. The number of large buyouts had
declined precipitously from 98 deals in 2007 to just 10 in 2009, before clawing back to 36 deals in 2011
(Exhibit 11). The pressure to put money to work and the resulting pickup in number of deals had increased
median purchase price multiples (PPMs) to 9.0× in 2011, almost as high as their peak of 9.5× in 2008. Not
unrelatedly, the increase in PPMs coincided with easing in the credit markets as the markets moved further
away from the financial crisis. Total debt-to-EBITDA multiples contracted sharply, from 7.6× in 2007 to
3.3× in 2009, necessitating a large increase in equity contributions from the sponsors. Thereafter, there had
been a significant increase in debt availability: the median debt multiple expanded to 6.2× in 2011. Over
2010–11, large buyouts had been approximately 60% debt financed on average. If current trends held, it
appeared that PE firms would have generous amounts of debt financing available, on the order of 5.5× to
6.0× EBITDA for a potential purchase of DPC.
Growth in EBITDA
Growth in EBITDA created value by improving the target’s operations by undertaking measures such as
product expansions, cost reductions, and add-on acquisitions. In assessing the opportunity for growth in
EBITDA, PE firms routinely conducted extensive due diligence to develop improvement plans after they
gained control of a company. A first step in this process was often to compare the target’s performance to
that of close competitors. Because PPG’s industrial and performance coatings business segments directly
competed with DPC, it was DPC’s closest peer. Compared with DPC, PPG had projected slightly stronger
sales growth and had achieved higher margins. PPG’s mix of products accounted for some of the difference,
but DPC’s lower margins were mostly the result of higher costs and overhead. Based on this assessment and
other due diligence, sponsors might reasonably expect to increase DPC’s sales growth by 1% to 2% and
improve its operating margins by 200 to 250 basis points.
DPC was led by DuPont veteran John McCool, 58, who was well regarded in the industry. McCool had
held a variety of leadership positions since joining DuPont’s Textile Fibers department in 1976. Kullman
named McCool president in 2010 after he had served as vice president for DPC’s Europe, Middle East, and
Africa (EMEA) operations. She had given him the specific charge to turn the division’s performance around.
All the PE firms that were contemplating a bid for DPC would have to evaluate McCool and his team to see
if they had the requisite skills to head the new company. If the current team was found wanting, the sponsors
would have to be prepared to replace management as part of their plans.
Multiple arbitrage
Multiple arbitrage arose when a sponsor received a higher PPM at exit for a target than it paid for it. All
else equal, the higher the entry PPM, the lower the chances of a sponsor achieving multiple arbitrage. At a
stand-alone value of approximately $4 billion, it looked as if DPC’s potential buyers would have to pay on the
order of 7× projected EBITDA for the company. Exit opportunities could arise from an IPO, sale to a
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strategic buyer, or sale to another PE fund (secondary buyout). Over the period 2006 to 2011, sales to
strategic buyers had been the most frequent mode of exit by PE firms (Exhibit 12). Due to the growth in the
size of the PE sector, however, secondary buyouts were a strong second to them. IPOs had fallen off as exit
vehicles, in part due to uncertain market conditions accompanying the financial crisis and its aftermath.
Because strategic buyers likely had greater opportunity for operating synergies with a target company, they
were commonly thought to pay more for a target than financial buyers. Based on the PPMs of recent exits,
however, the average PPM for exits to secondary buyouts was somewhat higher than the average PPM of
exits to strategic buyers (Exhibit 12). Based on the current valuation of PPG and potential market expansion,
sponsors might look to achieve 7.5× to 8.0× EBITDA at exit for DPC, given improvements in margins and
growth as a private firm.
Decision
If Ellen Kullman decided to divest DPC, she would put in motion an auction for the division. At that
point, DuPont would provide detailed information about the target and invite interested parties to bid. As
part of that process, she would likely set a minimum price for bidders. Her stand-alone valuation suggested
that the division was worth nearly $4 billion to DuPont. She would then need to assess how much potential
additional value could be obtained, both separately and jointly, from EBITDA growth, multiple arbitrage, and
the use of leverage to give her some idea of the potential range of values that bidders might offer. Relative to
that, she knew that sponsors would likely seek higher returns to justify the greater financial risk from the use
of leverage. Although financial buyers naturally sought the highest possible internal rate of return (IRR), in
the current environment of tough competition, they often had to settle for IRRs of 20%. With that in mind,
she would formulate her minimum required bid to ensure that shareholders’ interests were served no matter
what decision she reached about DPC.
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Exhibit 1
History and Outlook of Business
Data source: Macquarie Research, “E. I. du Pont de Nemours & Co.,” analyst report, January 26, 2012, adapted by authors.
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Exhibit 2
Stock Price Performance
$60
$50
$40
Stock Price
$30
$20
$10
$0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Performance Relative to S&P 500
1.6
Cumulative Return on $1 Invested
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Dupont S&P500
Data source: Yahoo! Finance.
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Exhibit 3
Business Segment Performance
(dollars in millions)
Segment Sales Year-over-Year Growth

2009 2010 2011 2009 2010 2011
Agriculture $7,069 $7,845 $9,166 7.9% 11.0% 16.8%
Electronics & Communications 1,918 2,764 3,173 -10.7% 44.1% 14.8%
Nutrition & Health 1,218 1,240 2,460 -13.2% 1.8% 98.4%
Performance Chemicals 4,964 6,322 7,794 -14.5% 27.4% 23.3%
Performance Coatings 3,429 3,806 4,281 -21.4% 11.0% 12.5%
Performance Materials 4,768 6,287 6,815 -25.3% 31.9% 8.4%
Safety & Protection 2,811 3,364 3,934 -24.4% 19.7% 16.9%
Industrial Biosciences 705
Other 158 194 40
Total segment sales 26,335 31,822 38,368
Elimination of transfers (226) (317) (407)
Net sales $26,109 $31,505 $37,961 -14.5% 20.7% 20.5%
Pretax Operating Income* Segment Margins

2009 2010 2011 2009 2010 2011
Agriculture $1,160 $1,293 $1,527 16.4% 16.5% 16.7%
Electronics & Communications 87 445 355 4.5% 16.1% 11.2%
Nutrition & Health 64 62 44 5.3% 5.0% 1.8%
Performance Chemicals 547 1,081 1,923 11.0% 17.1% 24.7%
Performance Coatings 69 249 271 2.0% 6.5% 6.3%
Performance Materials 287 994 973 6.0% 15.8% 14.3%
Safety & Protection 260 454 500 9.2% 13.5% 12.7%
Industrial Biosciences (1) -0.1%
Pharmaceuticals (discontinued) 1,037 489 289
Other (169) (206) (235)
Total pretax operating income $3,342 $4,861 $5,646 12.8% 15.4% 14.9%
* After significant items.
Data source: Company reports.
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Exhibit 4
Sales Growth Forecasts for Business Units
Est. Sales Growth Sales as % Sales as % of

Major Products Major Industry
(2012–14) of Product Industry
Agriculture 10% Corn seeds 47% Seeds 68%
Soybean seeds 15% Chemicals 32%
Herbicides 13%
Performance Chemicals 12% White pigments (TiO2) 47% Industrials and chemicals 36%
Fluoroproducts 34% Construction 31%
ChemSolutions 19% Specialties 18%
Performance Materials 4% Engineering resins 46% Transportation 37%
Ethylene co-polymers 23% Industrial 18%
Elastomers 9% Packaging 14%
Performance Coatings 3%–5% Refinish coatings 43% Vehicle aftermarket 43%
OEM coatings 31% Vehicle OEM 37%
Ind. liquid and powder coatings 26% General industrial 15%
Safety & Protection 7% Aramids products 39% Industrial 54%
Tyvek/Typar 26% Consumer 20%
Safety consulting and training 16% Construction materials 12%
Electronics & Communications 6% Photovoltaic materials 39% Photovoltaics 39%
Electronic materials 25% Consumer electronics 18%
Printing, packaging materials 18% Advanced printing 18%
Nutrition & Health 15% Food ingredients 100% Food ingredients 100%
Industrial Biosciences 29% Biomaterials—enzymes Bioprocessing 100%
Data source: Company data, Macquarie Research, “E. I. du Pont de Nemours & Co.,” analyst report, January 26, 2012, and author estimates.
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Exhibit 5
Performance Coatings Historical Performance
five-year
2007 2008 2009 2010 2011 CAGR
Net Sales $4,347 $4,360 $3,428 $3,806 $4,281 -0.3%
Year-over-Year Growth 0.3% -21.4% 11.0% 12.5%
Pretax Operating Income 366 -8 69 255 268 -6.0%
Margin 8.4% -0.2% 2.0% 6.7% 6.3%
Depreciation and Amortization 107 111 123 105 104

Research and Development 71 69 56 48 46
Capital Expenditures 126 91 55 74 80
Segment Net Assets 2,607 2,226 2,018 2,047 2,107
Sales by Industry
Aftermarket (refinishing) 53% 44% 43%
Vehicle OEM 28% 36% 37%
General Industrial 14% 14% 15%
Other 5% 6% 5%
Sales by Region
North America 26% 27% 27%
Asia-Pacific 12% 13% 13%
Europe, Middle East, and Africa 46% 44% 43%
Latin America 16% 18% 17%
Data source: Company Databooks, various years.
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Exhibit 6
Global Competitive Position in Industrial Coatings Market
Global Protective Auto

Position Architectural Industrial & Marine Refinishing OEM Packaging Aerospace
End Market Sales (billions) $95.0 $40.9 $24.7 $12.4 $6.7 $5.7 $2.9 $1.9
% of End Market Sales 100% 43% 26% 13% 7% 6% 3% 2%
Peer Ranking:
Akzo Nobel 1 1 1 1 3 3 2
PPG 2 3 2 2 1 1 2 1
Sherwin-Williams 3 2 4+ 4+ 4+ 4+
DuPont 4 4+ 2 3
Valspar 5 4+ 3 4+ 1
BASF 6 4+ 4+ 4+ 2
A blank cell indicates “no participation” in business vertical.
Penetration Rates of Top Global Competitors by Region
Percent of Sales of Top-10 Competitors

U.S. and Canada 75%
EMEA 60%
Asia-Pacific 30%
Latin America 30%
Data source: Buckingham Research Group, PPG Industries: “Other” Industrial Coatings Review, May 21, 2012.
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Exhibit 7
Trends Affecting Paint Demand in Vehicle Aftermarket
U.S. Vehicle Miles Traveled (billions)
3,100
3,000
2,900
Miles of Travel (billions)
2,800
2,700
2,600
2,500
2,400
2,300
1997 1999 2001 2003 2005 2007 2009 2011
Data source: U.S. Federal Highway Administration, Highway Statistics.
U.S. Motor Vehicle Accidents per Million
20
18
Motor Vehicle Accidents (per million)
16
14
12
10
8
6
4
2
0
1997 1999 2001 2003 2005 2007 2009
Data source: National Safety Council.
Page 15 UV6790
Exhibit 8
Trends Affecting Paint Demand from Vehicle Manufacturers
World Motor Vehicle Production
90
80
World Motor Vehicle Production
70
(units in millions)
60
50
40
30
20
10
0
1997 1999 2001 2003 2005 2007 2009 2011
NA ROW
Notes: NA = North America (United States, Canada, and Mexico); ROW = Rest of World.
World Production of Vehicles, 2000 and 2010.
2000 2010 % Change

North America 17,699 12,177 –31%
United States 12,800 7,761 –39%
Canada 2,964 2,071 –30%
Mexico 1,935 2,345 21%
Asia-Oceania 17,928 40,900 128%
Japan 10,144 9,625 –5%
China 2,069 18,263 783%
India 796 3,537 344%
South Korea 3,115 4,272 37%
Europe 20,275 19,822 –2%
France 3,348 2,229 –33%
Germany 5,527 5,906 7%
Italy 1,738 838 –52%
Spain 3,032 2,388 –21%
United Kingdom 1,814 1,393 –23%
South America 2,076 4,464 115%
Data source: Organisation Internationale des Constructeurs d’Automobiles (OICA) production statistics.
Page 16 UV6790
Exhibit 9
Stand-Alone Valuation
PPG Industries
Metric Actual Projected
2011 2012E 2013E
Sales Growth (%) 10.9% 4.1% 4.3%
EBIT Margin (Pretax) 11.2% 11.0% 12.0%
EV/EBITDA 2012 (×) 7.3
DuPont Performance Coatings

Metric Projected
Closing
2011A 2012E 2013E 2014E 2015E 2016E
Sales Growth (%) 12.5% 4.0% 4.0% 4.0% 4.0% 4.0%
Depreciation and Amortization $104 $115 $118 $122 $125 $130
EBIT Margin (Pretax) 6.3% 10.0% 10.0% 10.0% 10.0% 10.0%
1
Tax Rate 25% 25% 25% 25% 25% 25%
Capital Expenditures $80 $115 $122 $132 $144 $150
Net Working Capital (%) 15.0% 15.0% 15.0% 15.0% 15.0%
2
Terminal EBITDA Multiple (×) 7.0
Debt/EBITDA 2012 (×) N/A
Debt
Blended Interest Rate on Debt 6.75%
3
Unlevered Cost of Equity 11.2%
Page 17 UV6790
Exhibit 9 (continued)
Stand-Alone Valuation (continued)
APV Analysis
2011A Closing 2012E 2013E 2014E 2015E 2016E
Net Sales $4,281 $4,452 $4,630 $4,816 $5,008 $5,208
EBITDA $372 $560 $581 $604 $626 $651
Depreciation and Amortization $104 $115 $118 $122 $125 $130
Pretax Operating Income (EBIT) $268 $445 $463 $482 $501 $521
Interest Expense $0 $0 $0 $0 $0
Earnings before Taxes $445 $463 $482 $501 $521
Taxes ($111) ($116) ($120) ($125) ($130)
Net Income $334 $347 $361 $376 $391
Increase in Net Working Capital ($26) ($27) ($28) ($29) ($30)
Capital Expenditures ($115) ($122) ($132) ($144) ($150)
Residual (Levered) Cash Flow $308 $317 $323 $327 $341
Unlevered Free Cash Flow (FCF) $308 $317 $323 $327 $341
Terminal Value $4,738
Unlevered FCF, including TV $308 $317 $323 $327 $5,079
Enterprise Value (EV) $3,970
Interest Tax Shield
PV Tax Shield
EV with Tax Shield $3,970
Data sources: Historical information for DPC is from DuPont company Databooks. Projections are case writer estimates. PPG’s
enterprise value is based on prices at the end of January 2012. PPG’s projections are based on Buckingham Research Group
analyst report, PPG Industries: “Other” Industrial Coatings Review, May 21, 2012.
Notes to stand-alone model:

1 DPC’s estimated average tax rate of 25% is lower than the U.S. marginal corporate tax rate as a result of international
operations taxed at lower rates.

2 Assumed forward exit multiple for Terminal Value is based on projected EBITDA growth in 2017 and is below PPG’s
multiple because of lower margins and slightly lower growth.

3 Unlevered Cost of Equity (k ) is based on PPG’s estimated unlevered beta of 1.2, a normalized 4% long-term U.S. Treasury
u
rate, and a 6% market risk premium.
Page 18 UV6790
Exhibit 10
Financial Characteristics of Potential Strategic Buyers
(fiscal-year-end values in millions, except multiples and percentages)
Market Five-Year One-Year

Capitalization Total Debt/ Stock Stock
12/31/2011 Revenues EBITDA Total Debt EBITDA Performance Performance
Akzo Nobel NV $11,837 $18,972 $2,311 4,585 2.0× NA -21.0%
BASF SE $66,702 $95,482 $15,205 16,972 1.1× -5.4% -12.8%
PPG Industries $12,893 $14,885 $2,141 3,682 1.7× 30.0% -0.7%
Sherwin-Williams $9,263 $8,766 $956 993 1.0× 40.4% 6.6%
Valspar $3,637 $3,953 $513 1,057 2.1× 41.0% 13.0%
Data source: Financial data are from Capital IQ; stock price performance is based on CRSP data.
Page 19 UV6790
Exhibit 11
Buyout Deals
Volume and Number of Buyout Deals above $1 Billion
$600 120
$500 98 100
Deal Volume ($ billions)
No. Deals > $1 B

$400 80
$300 61 60
$200 41 40
33 36
28 31
$100 20
10
$0 0
2004 2005 2006 2007 2008 2009 2010 2011
Above $1B Under $1B No. Deals > $1B
Debt, Equity, and Purchase Price Multiples for Buyout Deals
Medians 2004 2005 2006 2007 2008 2009 2010 2011

Total Debt/EBITDA 5.3 5.0 5.9 7.6 4.4 3.3 4.6 6.2
Equity/EBITDA 2.3 3.2 3.1 1.2 5.0 3.2 2.7 2.8
Purchase Price/EBITDA 7.6 8.2 9.0 8.8 9.4 6.5 7.3 9.0
Data source: PitchBook, Annual Private Equity Breakdown 2012.
Page 20 UV6790
Exhibit 12
Private Equity Exits
Number of Exits by Exit Type
300
266
252
250 240
229
219
193
Number of Exits
200
164
150 142 150
150
107
100
66
51
50 33 40
24 30
14
0
2006 2007 2008 2009 2010 2011
Strategic buyer PE-backed IPO Secondary buyouts
Exit Multiple by Exit Type

p y yp
Medians 2006 2007 2008 2009 2010 2011 Average
Strategic buyer 9.5 10.9 9.5 8.0 8.5 8.7 9.2
PE-backed IPOs 5.8 11.7 10.8 7.4 7.2 5.1 8.0
Secondary buyouts 11.0 6.9 9.8 12.4 9.4 9.6 9.9
Data source: PitchBook and Grant Thornton, Private Equity Exits Report, 2012 Annual Edition.

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UV6790

Rev. May 11, 2017

DuPont Corporation: Sale of Performance Coatings

3 DuPont, “Letter to Shareholders,” 2010 Annual Review, 2011, 2.

Performance Relative to S&P 500

Data source: Yahoo! Finance.

Segment Sales Year-over-Year Growth

Pretax Operating Income* Segment Margins

Data source: Company reports.

Est. Sales Growth Sales as % Sales as % of

Depreciation and Amortization 107 111 123 105 104

Global Protective Auto

Penetration Rates of Top Global Competitors by Region

Percent of Sales of Top-10 Competitors

Data source: U.S. Federal Highway Administration, Highway Statistics.

U.S. Motor Vehicle Accidents per Million

World Production of Vehicles, 2000 and 2010.

2000 2010 % Change

DuPont Performance Coatings

Stand-Alone Valuation (continued)

Notes to stand-alone model:

operations taxed at lower rates.

multiple because of lower margins and slightly lower growth.

Market Five-Year One-Year

Volume and Number of Buyout Deals above $1 Billion

No. Deals > $1 B

Debt, Equity, and Purchase Price Multiples for Buyout Deals

Medians 2004 2005 2006 2007 2008 2009 2010 2011

Number of Exits by Exit Type

Strategic buyer PE-backed IPO Secondary buyouts

Exit Multiple by Exit Type

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