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Third Point, Dow Come To Terms

Détente: Hedge fund’s supporters, plus two others, will join Dow’s board

by Alexander H. Tullo
November 21, 2014

Dow Chemical and Third Point have agreed to a cease-fire.

Third Point, a hedge fund led by activist investor Daniel S. Loeb, had been using its 2.3% stake in Dow as a platform to advocate for change at the chemical maker. Complaining all year that high overhead drags Dow’s earnings below those of its peers, Third Point maintained that Dow’s shareholders would be better served if the company broke up.

Earlier this month, the conflict between the two companies became heated. Following Dow’s annual investor forum, designed to boost confidence in the firm’s strategy of integrating commodity chemicals with value-added specialties, Third Point went rogue. It launched a website, value-dow.com, that criticized Dow for making excuses about poor performance.

Third Point also designated two executives—R. Steven Miller, chairman of the insurance firm American International Group, and Raymond J. Milchovich, former Chief Exective Officer of the engineering company Foster Wheeler—as prospective nominees for Dow’s board.

Under the cease-fire agreement struck by the two firms, the two men will join Dow’s board, effective Jan. 1, 2015.

Two other executives, presumably picked by Dow, will also join the board. One is Richard Davis, CEO of U.S. Bancorp; the other is Mark Loughridge, former chief financial officer of IBM. Dow CEO Andrew N. Liveris serves on the IBM board.

Third Point has agreed to vote in favor of these directors at Dow’s shareholders meeting next spring.

Third Point and Dow have also agreed to a standstill agreement, which will maintain the status quo between the two parties for one year.

In a sign of a thaw between the two companies, Third Point has already taken down value-dow.com.

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