Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours
Thanks, Lori. I'm excited to share with you more detail on the two significant strategic news we announced this morning, which will further strengthen our portfolio and deliver long-term value for our shareholders. The announcement of an agreement to acquire Rogers Corporation and our intent to divest a significant portion of our M&M segment are substantial moves, advancing our strategy to shift the portfolio towards higher-growth and higher-margin businesses, while significantly enhancing the earnings stability of the company.
The acquisition of Rogers will build on the Laird Performance Materials' acquisition that we closed July 1, adding another high-quality business that expands our leading market position across highly attractive end markets. Rogers is a market leader in each of their primary product categories and brings a world-class organization with differentiated technology, innovation capabilities, technical expertise and deep customer relationships, the same value proposition that differentiates our DuPont businesses.
Rogers operates in end markets, where we have already established leading positions, such as consumer and mobile electronics, and in others that are adjacent to our businesses, such as 5G infrastructure and electric vehicles, enabling us to offer an even more attractive total value proposition to a broader base of customers and creating the opportunity to compound growth over time given complementary products and markets.
While M&M has been the market leader in high-performance thermoplastics serving automotive, electronics, industrial and consumer markets, we believe DuPont is no longer the best owner for this asset. By separating M&M from the rest of the portfolio, we are better positioning the business to expand on its leadership position in these markets and continue to tackle some of the industry's most critical challenges, such as vehicle safety and fuel efficiency.
We will leverage existing tax attributes to complete a highly efficient cash sale of the M&M business, providing ample funding to finance the Rogers acquisition as well as further M&A and share repurchases while maintaining a strong investment-grade credit rating. We have a few key targets, which like Laird and Rogers, we have been spending for a few years that would be excellent additions to our portfolio. Following the completion of the intended Rogers acquisition and the planned divestiture of M&M, DuPont will focus on key emerging technologies and have enhanced top line growth.
Our participation in the auto markets going forward is much more connected to high-margin, advanced technologies, enabling long-term secular trends, like hybrid and electric vehicles, as well as advanced driver systems. A large portion of our order exposure will be aligned to EVs and ADAS, both of which are growing at a significant pace.
This improved balance in our end markets will drive further consistency in our results and allow us to deliver best-in-class results among our multi-industrial peers, strengthening our position in clean energy and electric vehicles, combined with our existing positions in water, safety and protection technologies will continue to advance our customer sustainability priorities. Slide eight shows the modeling we have done for the company, assuming the completion of both the M&M divestiture and the Rogers acquisition, including full achievement of the planned cost synergies.
As you can see, pro forma DuPont will benchmark well above our top multi-industrial peers on both organic growth and EBITDA margin and in line with this high-performing peer set on cyclicality, which we measure as peak-to-trough earnings volatility. Our historical sales growth for the new portfolio will improve by 40 basis points to 3.8%, which is nearly two times the growth rate of the top peers. This growth is driven by our exposure to high-growth end markets.
For example, the semiconductor materials market is expected to grow at 4% to 6% per year which is evidenced by the significant investments in new fabs we are seeing in all regions of the world. Our $2 billion Semiconductor Technologies business, which holds leading positions in materials for both wafer production and packaging is positioned to outgrow the market by 200 to 300 basis points. Likewise, our $1.4 billion Water business operates in markets that are expected to grow high-single digits driven by the global response to concerns, such as water scarcity and circularity.
The acquisition we are making also increases our exposures in high-growth markets, such as EV, which is a market growing at 30% per year. Rogers' high-performance elastomers, specialty busbars and thermal substrates complement our existing materials, such as gap fillers, adhesives and Nomex papers. In the new portfolio, the strength in these businesses will accelerate the performance. In 2020, our top line for the core business declined about 5%, which was a solid result compared to our top multi-industrial peers, which were down about 8%.
Our new portfolio would have declined less than 3% during the worst of the recession in recent years, a substantial differential versus the peer set. We have taken several actions to drive top quartile EBITDA margins at DuPont. The M&M and Rogers transactions will deliver an additional 140 basis points of margin improvement on a 2021 basis, putting us well above our top multi-industrial peers. The new portfolio is a collection of specialty businesses underpinned by innovation, customer relationships and manufacturing excellence, a combination that supports robust, sustainable margins.
I'm also excited about the consistency these transactions will bring to our results. Strong ties to secular growth drivers will limit the earnings volatility of the company throughout the cycle. You can see the earnings volatility of the DuPont portfolio was significant from 2019 to 2020, primarily associated with the M&M segment. The same is true as we look back further where the cyclicality in the portfolio was driven by M&M. Looking forward, our portfolio have minimal exposure to commodity feedstocks and, as a result, our cyclicality will significantly improve by 700 basis points to be in line with the top tiers.
In addition to comparing to our top multi-industrial peer set, we also looked at how the new portfolio will benchmark against the entire set of 24 multi-industrial companies. The results are the same: we will benchmark well above the median of the entire multi-industrial group on both growth and margin and in line on cyclicality. With a more clearly defined portfolio and by improving the top line growth, EBITDA margins and cyclicality of the company to be well above our peer set, I am confident the quality of our businesses will be recognized, which will translate into a valuation comparable to top peers.
Getting DuPont to this point has been a multiyear journey, with decisive moves aligned with our value creation levers of active portfolio management, a best-in-class operating model and disciplined capital allocation. Slide nine shows the actions we have taken to transform the DuPont portfolio to a combination of world-class businesses centered in long-term, secular, high-growth areas.
Our strategy is intentional and included strategic decisions to shift the company to higher-growth, higher-margin businesses with less cyclicality, while also pursuing acquisitions to strengthen our leadership position and innovation capabilities in the secular growth areas of electronics, water, protection, industrial technologies and next-generation automotive.
Our portfolio transformation started with the identification of noncore businesses, where our innovation, technical expertise and close customer relationships no longer drove a competitive advantage within the DuPont portfolio. We have been successful at identifying great owners for a majority of these businesses and our work continues. We expect to close the sale of the Clean Tech business before the end of the year for around $510 million.
Earlier this year, we finalized the separation of the N&B business and an RMT transaction with IFF, creating a powerhouse in the food, beverage, health and biosciences markets. Separation of N&B provided a lift to the top line growth and operating EBITDA margins at the DuPont portfolio as N&B was at the low end of the portfolio on both measures. This was an unmatched opportunity to advance the DuPont strategy, including the receipt of $7.3 billion in tax-free proceeds, which we redeployed to create shareholder value and position N&B and IFF for future success.
Today's announcement of our intent to divest a significant portion of the M&M segment is the next step to advance our transformational strategy by increasing the resiliency and earnings stability of our portfolio. Throughout, we have carefully assessed acquisition targets, which can strengthen our leadership positions in the secular areas of electronics, water, protection, industrial technologies and next-generation automotive.
As I have said before, we are strategic in our approach and only pursue targets that can be justified financially and that operate in our existing markets to minimize integration and execution risks. We prefer acquisitions that provide a significant synergy opportunity, similar to what we saw with the water acquisitions we completed in late 2019, the Laird acquisition earlier this year and the intended acquisition of Rogers. We also only pursue targets where innovation and our technical capabilities set us apart, which is the case for both Laird and Rogers.
Our transformation strategy has also been underpinned by operational improvements. We have made fundamental changes in the way DuPont is run. We have the full P&L accountability into the businesses by moving oversight of manufacturing, operations and R&D under our business presidents. We spend approximately 4% of sales on R&D, and we no longer operate a central R&D function. Instead, we have empowered our businesses to allocate R&D dollars to the projects that are most critical to their growth and then hold them accountable for delivering results.
The same is true for capital spending, the majority of which has been focused on capacity-constrained areas. Throughout our transformation, the strength of our balance sheet has been and remains a priority. Following the N&B separation, we delevered our balance sheet to maintain a debt-to-EBITDA ratio and credit rating that provides us flexibility. We also continue to control our costs at both our manufacturing facilities as well as in our corporate functions.
We have been prudent at taking cost out of our G&A line and today have a best-in-class cost structure. The work in our manufacturing facilities is ongoing through continuous productivity and asset reliability improvements using new digital tools, which is an integral part of our operating plants today. The combination of focusing the portfolio and operational improvements have been part of our strategy to unlock shareholder value and strengthen the company.
The M&M and Rogers announcements are significant strategic steps in our transformation. I'll move to slide 10 to provide more details on the Rogers agreement. Our modeling of Rogers is based on our 2022 estimated EBITDA of $270 million, which we are highly confident the business will achieve based on a thorough diligence process, including a detailed review of their projections and assumptions. The purchase price of about $5.2 billion represents a 19 times EBITDA multiple based on 2022 estimates before synergies.
The multiple is expected to be below 14 times after cost synergies. We are highly confident in the synergy number of approximately $115 million and our ability to achieve most of the forecasted synergies by the end of 2023, within 18 months of closing. We expect Rogers to be accretive to top line growth, operating EBITDA, free cash flow and adjusted EPS upon closing. We expect sizable revenue synergies from the combination of E&I, Laird and Rogers. But consistent with how we justify old deals, we have not assumed any revenue synergies in our modeling.
And we expect closing to take approximately six months, putting us in the second quarter of 2022. Because the Rogers transaction will close before we expect the M&M divestiture close, in funding the acquisition, we expect to prioritize prepayable debt, which can be retired upon receipt of the M&M proceeds to return our leverage to more normal levels. Slide 11 provides more detail on the synergy opportunities.
DuPont is in a unique position to extract value from this combination due to the synergy opportunity that comes not only from having one of the largest electronic material businesses in the industry, but also from the acquisition of Laird that we completed a few months ago. We looked across all three organizations to determine where there were synergy opportunities. As is the case in many of our transactions, where we combine businesses, we have complementary product offerings in similar segments.
We expect significant synergies in procurement spend as well as G&A costs. Because Rogers is a public company, we will also realize savings associated with folding them into our structure. Our anticipated Rogers cost synergies of $115 million, combined with the cost synergies we anticipate from the Laird acquisition, total approximately 6% of the combined revenue of our Interconnect Solutions business, Laird and Rogers, which is a very achievable synergy target.
As I mentioned, we expect to achieve most of these synergies with 18 months of closing. Turning to slide 12, I'll provide more detail on the business. Rogers Corporation is a $950 million business with broad end market exposure. We expect Rogers' top line to grow in the high single digits, accelerated by leading positions in the rapidly growing categories of electric vehicles and advanced driver systems. The benefits of the planned synergies will deliver uplift to the EBITDA margins across all three businesses. Rogers has two operating segments with leading positions in each.
The first segment is Advanced Electronic Solutions, which includes the high-frequency circuit board laminates business and the power electronics business. Rogers' second segment is Elastomeric Material Solutions. The high-frequency circuit board laminates business complements our existing printed circuit board business within Interconnect Solutions. This is approximately a $300 million business that manufactures copper-clad laminates for high-frequency circuits using ADAS radars, 4G/5G base stations and military communications.
Also included in the Advanced Electronic Solutions segment is the Power Electronics business, which includes both ceramic substrates and specialty busbars for high-power conversion used in applications, such as electric motors for trains, ships, automobiles and wind turbines. Specialty busbars are used instead of cable harness systems and high-power conversion applications when highly stable and reliable power conversion is critical.
This is about a $250 million business today, but poised for significant growth with exposure to next-generation technologies, including battery applications for hybrid and electric vehicles. The second segment is the Elastomeric Materials Solutions segment, approximately a $400 million business, which manufactures precision phones and silicon materials with high reliability and high purity for cushioning, sealing, impact protection and vibration management across the number of growing end markets. This segment also has high exposure to electric vehicles for battery applications.
On slide 13, you can see the significant offerings in the combined entity through the examples of the electric vehicle, 5G infrastructure, consumer electronics and clean energy. The increased opportunity in electric and autonomous vehicles from the combination of Laird and Rogers adds to DuPont's existing material offerings into the electric vehicle.
In a segment that is growing 30% per year, this is a tremendous opportunity to increase our share of wallet with offerings such as gap fillers, adhesives and Nomex paper from DuPont; high-performance elastomers, specialty busbars and thermal substrates from Rogers; and electromagnetic shielding and thermal management solutions from Laird. Likewise, Laird and Rogers expand our offering in consumer electronics, where DuPont is already a leading material supplier through all three businesses within the E&I segment: Semiconductor Technologies, Interconnect Solutions and Industrial Solutions.
EMI shielding, thermal interface materials and multifunctional solutions from Laird as well as high-performance elastomers from Rogers will make us an even more complete material supplier to leading OEMs. The combined application engineering and design expertise will be unmatched in the industry. We are very excited about the technical skills that will transfer to DuPont through both of these acquisitions, which will enable the businesses to continue working with customers to solve their most critical challenges using our combined portfolio of advanced technologies, a hallmark of all three companies.
Customers in these industries demand this level of sophisticated innovation and partnership. You can see how the acquisition of Laird and Rogers supports our strategy to expand our presence in high-growth secular end markets and creates opportunity for compounding growth across related products and markets. Slide 14 shows the combination of the Laird acquisition and the Rogers acquisition is highly complementary and can expand our addressable markets within key electronics segments by 50%.
The addition of Laird and Rogers provides an entry way into markets, such as clean energy, wireless infrastructure and defense electronics, where we previously had little exposure, but will now have distinct competitive advantages. We see further opportunities for growth by leveraging the DuPont technologies across these additional electronics markets. The timing could not be better to enter these markets. The world is making significant investments in 5G infrastructure, clean energy and hybrid and electric vehicles, to name a few.
These investments are leading to rapid growth in these areas. Rogers has been making significant investments in these areas and has a rich pipeline of offerings that will support the next-generation technologies. The acquisition creates an exciting opportunity to capture this growth, which we think will be compounded by leverage of the combined E&I, Laird and Rogers platforms. Moving to the intended M&M divestiture, on slide 15. At DuPont, we have a proven history of adapting the best owner mindset for each of our businesses.
We constantly scrutinize our portfolio to ensure fit with our business objectives and to create as much long-term value as possible for our shareholders, customers and employees. By announcing that we have initiated a process to divest the majority of our M&M segment, we are committing to do just that: finding the right owner for a tremendous asset. The business to be sold predominantly includes the Engineered Polymers and Performance Resins lines of business.
Approximately $700 million of current year revenue, M&M segment is not included in the scope of the divestiture and includes the automotive, adhesives and multi-based businesses, which align nicely with our offering for EVs and industrial technologies. The portfolio to be divested is expected to generate revenue this year of about $4.2 billion and about $1 billion of EBITDA. M&M is an industry-leading combination of high-quality businesses with best-in-class technology and application development, deep customer relationships, brands and manufacturing excellence.
The business is well positioned to capitalize on the continued transition to hybrid electric vehicles and other emerging megatrends. The business is also poised to outperform its peers through the cycle, with a lean G&A structure, efficient manufacturing processes and a reliable supply chain of key raw materials. We expect that the divestiture process will move quickly. In fact, we will launch a marketing process in the coming days. We have considered multiple deal structures as part of the strategic review.
We believe a transaction that maximizes the net cash proceeds to DuPont will enable us to build on our core areas of strength, like the Laird and Rogers transaction, and create significant value for our shareholders. I look forward to updating you as our process advances. I'll wrap up with a few comments on why I'm excited about their future at DuPont on slide 16. With the completion of the Rogers acquisition and the M&M divestiture, DuPont will be building around our core foundational pillars, including electronics, water, protection, industrial technologies and next-generation automotive.
Each of these areas is experiencing rapid growth as a result of significant secular tailwinds with long-term growth drivers, from high-frequency connectivity in the most advanced technologies to water scarcity in some of the most remote parts of the world, the technical demands of our customers are high and we have a unique advanced technologies to partner with them to solve these global challenges. The actions we have already taken, along with those we announced today, enable us to strengthen our leadership position in each of the markets we serve.
I am confident this will lead to significant opportunities for employees and unmatched solutions for our customers. We are also creating an opportunity for significant value creation for our shareholders. As I mentioned previously, the combined transaction enhanced our financial profile through higher growth, higher margins and significantly more stability. We will be positioned to outperform throughout the cycle.
These are indicators of a strong, healthy and vibrant company, and I'm confident we will benchmark with the best of our multi-industrial peers. Our capital allocation will remain balanced, returning value to our shareholders through a consistent dividend, that we expect to grow with earnings and share repurchases, as well as a strong balance sheet have been and will continue to be priorities for DuPont. We will also continue to invest in our business to grow organically and support their growth through select and targeted M&A.
With that, let me turn it to Pat to open the Q&A.
