01:47 PM EDT, 05/28/2024 (MT Newswires) -- DuPont de Nemours' ( DD ) plan to split up holds clear logic in capturing higher valuations for its Water and Electronics businesses while also showing some disadvantages from smaller market values, BofA Securities said in a note.

Last week, DuPont ( DD ) said it would split into three publicly traded companies, proposing separations of its Electronics and Water businesses in a tax-free manner to shareholders with New DuPont continuing as a diversified industrial company.

Investor interest has been moderate due to the uncertain magnitude of per- and polyfluoroalkyl substances liabilities and the diversity of businesses constraining valuation to well below specialty chemical peers, the report said.

"If a deal were to happen on the announced terms, the breakup would create pure-plays in two end markets with significant long-term growth potential, driven by water shortages and societal electrification, and which we believe could trade at higher

multiples," BofA said.

The report also pointed to challenges to sum-of-the-parts valuation, including a greater PFAS liability risk to the smaller entities, and possible lower multiple for industrial and water businesses against peers.

"While the company's plan to split into 3 companies could create potential upside in our view it will still create 3 smaller

companies that still have PFAS liabilities," the report said.

BofA reiterated its underperform rating on DuPont ( DD ) while raising its price objective to $80 from $74.

Price: 82.19, Change: +1.07, Percent Change: +1.32