In short: A spin-off special situation in a business he admires but no longer owns. "I no longer own Corteva, but it is a high-quality agricultural company… the stock had rallied all the way to 90." The spin math: the seed SpinCo ("Vialores") valued at "between 16 and 17 times… EBITDA, which implies a $45 billion market cap for the seed business, whereas… the RemainCo… about eight times EBITDA… 11 to 12 billion… one of the few scenarios where the RemainCo should probably sell off and… the seed business could actually catch a bid." The obstacle: "California's AG along with 19 other states asked a federal court in South Carolina to temporarily block the October 1st spin" over PFAS liabilities, which Corteva will contest. In Q&A: seeds ~57% of revenue on a century of Pioneer germplasm ("unless you were to actually break down their seeds… you really can't replicate this"), Enlist traits licensed to 100+ seed companies, a 2026 flip "from a net royalty expense to a royalty positive company," +3% seed price-mix while farm prices fall ("farmers buy yield, not commodity inputs"), and "about 3 billion of free cash flow" — "It's a gem of a business." Promised a fuller recap next Sunday.
Corteva is one of the world's big agricultural companies: it breeds and sells crop seeds (including the century-old Pioneer brand) and makes crop-protection chemicals. Seeds are the better business. Farmers buy the seeds that give them the best yield, so they rarely switch; over 100 other seed companies license Corteva's genetics; and the company has just become a net receiver of licensing royalties rather than a payer. It has raised seed prices even while crop prices have fallen.
Corteva plans to split into two companies on October 1. The seed business (to be called Vialores, per the call) could be valued like a premium business, at 16-17 times its operating earnings, while the remaining chemicals business might be valued at only about 8 times. Part of the reason for the split is to keep the seed business clear of potential legal liabilities from PFAS "forever chemicals." California and 19 other states have asked a court to block the split, arguing the remaining company would not have enough money to cover those liabilities.
Singh no longer owns the shares but calls Corteva "a gem of a business." He expects the seed company to attract buyers after the split and the leftover company to sell off — a pattern he watches in spin-offs — and has promised a fuller review next week.
Full passage: premium transcript (PDF).
In short: Named by Terranova as a direct beneficiary of the weather catalyst behind his Nutrien buy: "remember we have the forecast for a significant El Niño weather event that is going to affect global food supplies — that benefits names like Nutrien, like Corteva and like Intrepid Potash." The seed-and-crop-protection leg of the same trade; no position disclosed.
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