Third Point Lashes Out At Dow

Third Point, the hedge fund headed by activist investor Daniel S. Loeb, has delivered a broadside against Dow Chemical in the wake of the largest U.S. chemical maker’s investor forum held in Houston.

The investment firm, which calls itself a “significant” investor in Dow, has set up the website value-dow.com. “Value-dow.com will serve as a central repository of information for investors who share Third Point’s concerns about Dow’s persistent under-earning, questionable capital allocation decisions, and lack of accountability to stakeholders,” it says.

Third Point complains that Dow has underperformed its peers in petrochemicals and is calling on the company to separate its commodity and specialty chemical operations.

On the website, Third Point posted a video that is a pastiche of the political ads that air on television in the fall. It opens with dramatic music, gray smokestacks, and a baritone narrator. “It is a story of an American icon, known globally for its legacy of innovation and its products,” the narrator intones. “But it has become a story of broken promises.”

Such promises, the video points out, include a 2008 pledge by Dow Chief Executive Officer Andrew N. Liveris to never cut the dividend. The firm lowered its dividend in 2009 while it was trying to finance its purchase of Rohm and Haas.

The video also mocks Liveris’s assertion that Dow is a “no excuses” company. “The truth is that Dow has had to make plenty of excuses while it continually breaks it promises to shareholders,” the narrator says.

In another move meant to pressure Dow, Third Point named an advisory board of two executives who will “provide guidance” on how Dow can increase value. One is R. Steven Miller, chairman of the insurance firm American International Group (AIG); the other is Raymond J. Milchovich, former CEO of the engineering company Foster Wheeler. Third Point is expected to nominate the two men as Dow directors.

At the investor forum earlier this week, Dow announced divestments and the reorganization of its business segments more in line with its peers, two moves that would seem to align with Third Point’s objectives. Liveris also said at a meeting with reporters that he confers regularly with Loeb.

Dow also has something to say about Third Point’s new website. “The statements contained therein display a fundamental lack of understanding of the company and an approach by an activist investor that has little interest in anything that benefits the many long-term shareholders in Dow,” the company said in a statement.