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DuPont-Trian Fight Escalates

Finance: Activist hedge fund seeks seats on DuPont’s board

by Alexander H. Tullo
January 15, 2015 | A version of this story appeared in Volume 93, Issue 3

Credit: Andre Jenny Stock Connection Worldwide/Newscom
DuPont’s sale of the DuPont Theatre, shown here, will only partially satisfy activist investors.
Photo of the DuPont Theatre in Wilmington, Del.
Credit: Andre Jenny Stock Connection Worldwide/Newscom
DuPont’s sale of the DuPont Theatre, shown here, will only partially satisfy activist investors.

The conflict between DuPont and Trian Partners is heading to a showdown at DuPont’s annual meeting this spring. Fed up by what it sees as poor performance at DuPont, the activist investment fund, which has a 2.7% stake in the firm, has nominated four people who will stand for election as DuPont directors at the meeting.

In a 35-page letter and white paper sent to DuPont, Trian founder Nelson Peltz laid out his case that DuPont is a lumbering conglomerate with a management team that has been chronically destroying shareholder value. He pointed out that although the company divested $40 billion worth of business since 1998 and acquired $12 billion worth over the same period, DuPont’s stock is 21% off its peak of that year.

Peltz reiterated his call to break up DuPont beyond the pending spin-off of the Chemours performance chemicals segment. In his vision, one new firm would be a growth company centered on Danisco and the Pioneer seed business. Another would hold industrial staples such as electronic materials and engineering polymers.

“Trian is concerned that DuPont’s senior leadership team, which has over 600 years of collective work experience at the company, is insular and will continue to step into the same potholes that have destroyed value over a long period of time,” Trian said.

Peltz himself is one of Trian’s nominees to DuPont’s board. Another is Robert J. Zatta, acting CEO of chemical maker Rockwood Holdings. Trian’s two other choices are John H. Myers, former president of GE Asset Management, and Arthur B. Winkleblack, former chief financial officer of H. J. Heinz Co.

Deutsche Bank stock analyst David Begleiter is watching the brewing fight. “We believe the upcoming proxy fight between Trian and DuPont will be a referendum on DuPont’s performance under CEO Ellen Kullman, who has been CEO since 2009,” as well as on whether DuPont should be further separated after it spins off Chemours, he told clients in a research note.

Peltz’s gambit isn’t without precedent. Last November, activist investor Third Point threatened to nominate two directors to Dow Chemical’s board. The two parties later reconciled and agreed to install four new independent directors at Dow’s next annual meeting.

DuPont had a sharp rebuke for Trian: “Despite numerous efforts to engage constructively, including multiple calls and meetings with our CEO, CFO, and lead independent director, Trian has chosen this path with the potential to disrupt our company at a key stage of execution against our plan.”

DuPont is making one move Trian has been clamoring for: It is selling the DuPont Theatre in Wilmington, Del., to the Grand Opera House. Separately, last month DuPont said it would vacate its Wilmington corporate headquarters in favor of its facilities in nearby Chestnut Run.



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