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Activist Investors Take Stakes In FMC And DSM

Hedge funds target chemical firms for investment returns

by Marc S. Reisch
August 22, 2014 | APPEARED IN VOLUME 92, ISSUE 34

Jana Partners and Third Point, hedge funds run by activist investors Barry Rosenstein and Daniel Loeb, respectively, have each acquired stakes in agricultural and lithium chemicals maker FMC. Separately, Loeb’s fund has invested in DSM, a Dutch maker of polymers and nutrition ingredients.

Both investors are known to take stakes in firms—Dow Chemical and Ashland are examples—and then urge managers to make changes. But sometimes they just hold investments looking for returns.

According to recent filings with the U.S. Securities & Exchange Commission, Jana bought a 4% stake in FMC worth more than $330 million. Third Point bought a 1% stake worth about $110 million.

Neither hedge fund has commented on its investment in FMC, which lowered its 2014 earnings forecast in June because of lackluster pesticide sales. A spokesman for FMC would say only that “we have had discussions with them as we would with any of our top shareholders.”

Third Point revealed in a July letter to investors that it bought a “position” in DSM but didn’t say how large it is. The letter did point out that DSM’s shares are undervalued compared with those of peer companies, and it suggested DSM’s automotive and construction polymers business could be sold off for a good price.

However, activist investors don’t always look for change, according to John Roberts, a stock analyst with UBS Securities. As a rule of thumb, up to 20% of activists’ assets can be considered cash on the sidelines, Roberts says, “or else they wouldn’t have any ‘dry powder’ to make an investment when an opportunity comes along.”



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