Dow Investor Calls for Changes in Post-DuPont Merger Breakup -- Update

By David Benoit Features Dow Jones Newswires

Another big investor is calling for revisions to the landmark proposed merger of Dow Chemical Co. and DuPont Co.

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Glenview Capital Management LLC recently met with leaders of both companies and pushed for changes in a plan to break the combined group into three parts, according to a letter the hedge fund sent to its investors late Tuesday.

The fund also criticized Dow's decision to delay the retirement of Chief Executive Andrew Liveris, who was originally supposed to step down around now but now plans to stay on longer, according to the letter, which was reviewed by The Wall Street Journal. Glenview believes the delay and the current split plan will impact Dow's ability to find a new leader.

The chemical giants announced their roughly $60 billion merger in December 2015. Shareholders approved it last July and after a delay winning regulatory approval are now expected to complete the deal in August. Within 18 months of completion, the behemoth is supposed to split into three companies: one agricultural, one focused on materials and another on specialty-chemical products.

Investors have grown wary of the details of the breakup plan and the companies said in May they would review it. Dow and DuPont have said they "are fully aligned regarding the objective of the review" and would consult with investors. The companies had no immediate comment Tuesday.

Glenview's letter says it owns about $1 billion of Dow stock, amounting to less than 1% of the company's total value. The fund, which isn't typically a public activist, said in the letter that it largely supports the roadmap Daniel Loeb's Third Point LLC detailed last month in a presentation. The activist, another Dow investor, called for shifting nearly a third of the earnings from the proposed materials business to the specialty-products operation.

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Trian Fund Management LP, another activist that's a big DuPont shareholder, has also privately pushed for changes, as have other investors and analysts, people familiar with the matter have said.

In general, the investors argue that the materials company should be a more commodity-focused business that would trade at lower multiples, while the specialty business could comprise a mix of higher-margin chemical and other products.

Glenview's letter raises Mr. Liveris's tenure as a concern too, saying it voted for the deal in part because Dow had announced he would step down this month. Earlier this year, Dow said Mr. Liveris would stay on as CEO until next year as a way to see the deal through and help with the formation of the materials business.

"The change in the committed timeline that was clear prior to shareholder approval of the transaction is inappropriate and creates the appearance of conflict between personal and communal goals," Glenview wrote.

Write to David Benoit at david.benoit@wsj.com

Another big investor is calling for revisions to the landmark proposed merger of Dow Chemical Co. and DuPont Co.

Glenview Capital Management LLC recently met with leaders of both companies and pushed for changes in a plan to break the combined group into three parts, according to a letter the hedge fund sent to its investors late Tuesday.

The fund also criticized Dow's decision to delay the retirement of Chief Executive Andrew Liveris, who was originally supposed to step down around now but now plans to stay on longer, according to the letter, which was reviewed by The Wall Street Journal. Glenview believes the delay and the current split plan will impact Dow's ability to find a new leader.

The chemical giants announced their roughly $60 billion merger in December 2015. Shareholders approved it last July and after a delay winning regulatory approval are now expected to complete the deal in August. Within 18 months of completion, the behemoth is supposed to split into three companies: one agricultural, one focused on materials and another on specialty-chemical products.

Investors have grown wary of the details of the breakup plan and the companies said in May they would review it. Dow and DuPont have said they "are fully aligned regarding the objective of the review" and would consult with investors.

In a statement, the two companies said Mr. Liveris and DuPont Chief Executive Edward Breen are in "daily communication working collaboratively along with the companies' lead independent directors to advance a strategic review of the portfolio mix and alignment across divisions."

The companies added the boards were committed to maximizing the value of all the spinoffs and welcomed investor feedback.

Glenview's letter says it owns about $1 billion of Dow stock, amounting to less than 1% of the company's total value. The fund, which isn't typically a public activist, said in the letter that it largely supports the roadmap Daniel Loeb's Third Point LLC detailed last month in a presentation. The activist, another Dow investor, called for shifting nearly a third of the earnings from the proposed materials business to the specialty-products operation.

Trian Fund Management LP, another activist that's a big DuPont shareholder, has also privately pushed for changes, as have other investors and analysts, people familiar with the matter have said.

In general, the investors argue that the materials company should be a more commodity-focused business that would trade at lower multiples, while the specialty business could comprise a mix of higher-margin chemical and other products.

Glenview's letter raises Mr. Liveris's tenure as a concern too, saying it voted for the deal in part because Dow had announced he would step down this month. Earlier this year, Dow said Mr. Liveris would stay on as CEO until next year as a way to see the deal through and help with the formation of the materials business.

"The change in the committed timeline that was clear prior to shareholder approval of the transaction is inappropriate and creates the appearance of conflict between personal and communal goals," Glenview wrote.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

June 27, 2017 22:05 ET (02:05 GMT)