Corteva to Spin-Out Seed from Crop Protection and Liabilities

Index

1. Overview

2. Business Environment Adaptation

3. Three Pronged Rationale

4. Overview of Each Business Independently

5. What Happens Next? Acquisitions.

6. 11 Burning Questions Still Unanswered

7. Final Thoughts

Overview

Corteva Agriscience confirmed a Wall Street Journal Report from September that it will split into two independent, publicly traded companies: one focused solely on crop protection (that management called “NewCorteva”) and the other on seed (temporarily called “SpinCo”).

The board unanimously approved the move, which is expected to be completed in the second half of 2026.

Initial leadership roles have been outlined, with current Chairman Greg Page set to chair NewCorteva and CEO Chuck Magro set to lead the SpinCo.

The market has reacted skeptically so far. Corteva’s share price has fallen more than 14% since speculation of the split began, reflecting investor concerns around the rationale and valuation implications.

Business Environment Adaptation: Bundling and Unbundling

Business decisions and structures are shaped by current trends and the environment, including in public companies by expectations of what capital markets view as relevant and strategically important.

Investor sentiment, macroeconomic context, and prevailing narratives all influence corporate structure decisions and how they are rewarded or penalized. Not to mention, changing industry dynamics that pressure integration and disintegration, as thoughtfully illustrated by Charles Fine in his book Clockspeed:

What matters today is not what mattered a decade or two ago, or what will be crucial in 5 years.

Consider that the narrative in 2016/17 was the integration of seed and crop protection along with scale was going to be the only way to compete in the market— the view was for scale and integration in complementary segments. This wasn’t just the case for agriculture, but downstream in Food, or in Media or in Mining, this was the case. The trends have shifted.

The Overton Window is a useful lens to make sense of this, too.

Traditionally it has been applied in politics and it describes the range of ideas that are considered acceptable or valued at a given time. Applied to a business setting, it shows the actions, structures and strategy that companies see as viable and investors see as legitimate and valuable. The window moves, especially when there are trends — like geopolitics and consumer preference rapidly changing.

A structure once celebrated can, over time, go “out of style” or even be punished.

25 years ago, conglomerates sat firmly inside the window. General Electric was the model. Investors valued the stability of internal capital markets — the ability to redeploy cash from mature divisions into new growth opportunities, along with the efficiencies of scale in manufacturing and distribution. Executives were praised for using the breadth of the portfolio to smooth cyclical swings. Diversification was seen as a source of resilience and optionality. We saw this in agriculture too— in Lords of Harvest by Dan Charles there is mention about the thinking that in order to be successful in biotech and crop protection, there was a need to siphon off cash from pharma or chemical segments in order to fund biotech, and we see that in the structure of the industry even today in the German titans Bayer and BASF.

However, that view has shifted on Wall Street.

Conglomerates now trade at multiple discounts with their complexity being viewed as a liability rather than a strength.

Investors prefer pure-play exposures with clear benchmarks and capital allocation discipline, being able to lean into specific strategies and put capital into highest return activities.

Activist investors reinforce this, pressing management teams to break up businesses that blur the growth story. Kraft’s separation into “Global Taste Elevation Co,” consisting of brands like Heinz, Philadelphia and Mac & Cheese and then “North America Grocery Co” consisting of slower growing food segments and focus more on operational efficiency, or Warner Brothers and Discovery splitting into Streaming & Studio’s and Global Networks, illustrate how markets reward the clarity that comes from separating higher-growth businesses from slower-growth ones.

Corteva fits squarely into this shift with Crop Protection and Seed/Trait, too — such as seed moving rapidly towards out-license IP (high margin) vs. crop protection being more about operational execution.

Plus, its seed and crop protection businesses compete for attention and capital against a backdrop of very different supply chains (local vs. scaled), core competencies, go-to-markets, lobbying pressure and competitive dynamics.

By spinning out seed from crop protection, the “SpinCo” is positioned as the only pureplay seed company in the Western public markets and can be judged on its own innovation pipeline, growth potential, and margin profile.

The move aligns with today’s Overton Window and industry “Clockspeed” for corporate structures— where focus and clarity are prized over breadth and diversification and where there are return multiples to be unlocked.

In Corteva’s case, the the specific rational runs even deeper, and it also might be a signal for what is to come within the crop protection and seed segments.

Rationale

The answer to “why” is straight forward and partially laid out above: The Corteva Seed Business represents a fundamentally stronger business segment from long term growth prospects, differentiation, margins and being unencumbered by environmental and pension liabilities associated with the crop protection business. In listening to the Investor Call, it was unquestionable that CEO Chuck Magro was much more positive and optimistic on the Seed side of the business, and his actions in taking over as the CEO of that segment reinforce that.

But lets’ dive into three areas more deeply.

1. Current and Potential Near Term Liabilities

If you read Corteva annual reports over the last few years, you see the topic of “PFAS” or Perfluoroalkyl and Polyfluoroalkyl Substances arise. These are known as forever chemicals.

There is a lot of talk about liabilities around PFAS lately.

In August, Reuters reported that Corteva, along with DuPont and Chemours had settled to pay the state of New Jersey $875 million over 25 years. If we dig deeper, we find lawsuits accusing chemical companies of polluting U.S. drinking water with PFAS chemicals led to over $11 billion in settlements in 2023 alone, with many experts predicting that new federal regulations and a growing awareness of the breadth of the contamination will spur more litigation and settlements.

Bayer is on the hook for PFAS liabilities, too.

These liabilities could hinder the Pioneer Seed brand, which arguably is a top 2 brand in agriculture, along with decrease cash flows for the business.

Not to mention, last week we heard from US Secretary of Agriculture Brooke Rollins that the US government is going to look into crop protection, seed and fertilizer anti-competitive behavior.

About 50% of Corteva’s total business is in the United States.

Corteva is currently in a battle, along with Syngenta, with the Federal Trade Commission for anti-competitive behavior and while the lawsuit is surrounding crop protection specifically, there could be some leakage to how Corteva handles its seed business as well given the increased risk of scrutiny— such as Corteva’s TruChoice.

2. Near Term Value Unlock: $10 Billion Opportunity

Corteva’s seed business currently accounts for roughly 55% of sales and about 65% of EBITDA.

The idea of splitting seeds and crop protection naturally raises the question: does the sum of the parts unlock more value than the whole, at least from an investor perspective?

Having both crop protection and seed under one roof seemingly hasn’t constrained Corteva’s valuation, and arguably it has enhanced the ability to grow each business segment due to bundling. In fact, the crop protection business may have benefitted from the “halo effect” of being paired with one of the world’s leading seed businesses.

For example, FMC provides a reference point — it’s a stand-alone crop protection company and it’s market capitalization trades at ~9x EBITDA, compared to Corteva’s >13x multiple (whole company in aggregate).

By applying FMC’s multiple to Corteva’s crop protection business, the math implies Corteva’s seed unit is being valued at ~16x EBITDA.

If separated, seeds could command 18–20x EBITDA or higher, which is where the shareholder value unlock comes from.

Several dynamics drive this.

There’s no publicly traded, large-scale, stand-alone seed company in the U.S. or Europe to benchmark against, which is unfortunate from a comparables perspective, but useful from a “scarcity” perspective — investors might be willing to pay a premium for higher margins, better long-term growth prospects, unique exposure to seed, and a growing high margin licensing business.

A useful historical comparison is Monsanto.

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