DowDuPont to Change Breakup Plan

By David Benoit Features Dow Jones Newswires

Two weeks after its formation, DowDuPont Inc. is altering its plan to splinter into three companies, a step that appears set to end the threat of a fight with as many as four activist investors.

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The company, formed by the union of Dow Chemical Co. and DuPont Co. on Aug. 31, has long planned to split into separate companies in the next 18 months: agriculture, specialty-chemical products and materials.

The new plan moves businesses with more than $8 billion in annual revenue from the materials spinoff, which is to house the legacy Dow operations and be named Dow, into the specialty-chemical concern, according to people familiar with the matter.

The move will separate into parts what had been Dow Corning, a pioneer in silicone technology that was taken over by Dow last year, and put some of it into each of the specialty and materials companies, the people said. Previously, the silicone business was to be housed entirely in the new Dow.

The product of a five-month review, it will enable those two companies to focus on different customers, the people said.

Shareholders, including activists Trian Fund Management LP, Third Point LLC, Glenview Capital Management LLC and Jana Partners LLC, had pressed for a dramatic reshaping of the breakup, particularly as it relates to the silicone business.

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At least some of the investors are expected to be appeased by the changes, some of the people said.

The new Dow will house products aimed at packaging, infrastructure and consumer care and now have roughly $40 billion in annual revenue, the people said. The specialty-chemical business will focus on electronics and imaging, transportation, construction and nutrition, with some $20 billion in revenue.

The agriculture business, with about $14 billion in revenue, will remain the same.

The review of the split plan was led by consultants at McKinsey & Co. It included directors who made site visits to several company plants and sought to incorporate changes to the markets in the nearly two years since the roughly $60 billion merger and the split were first announced in December 2015, the people said. As part of the review process, McKinsey talked with 25 of the biggest shareholders, they said.

The new Dow is expected to be the first spinoff. Andrew Liveris, executive chairman of the combined company and formerly chief executive of Dow, is running the process to set up the company and will retire next year.

DuPont's Edward Breen, now CEO of DowDuPont, is in charge of establishing the other two companies and hasn't yet declared his post-split plans.

Dow had pitched investors on the value of the combination of silicone with its commodity chemicals. Dow executives believe the growth in silicones since Dow took over Dow Corning was evidence of the sales and research potential of a combination of the two companies, and argued that stripping it out of Dow would be counterproductive.

The activists had said the business fit better with specialty chemicals and would command a higher stock-market value there.

--Dana Mattioli contributed to this article

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

(END) Dow Jones Newswires

September 12, 2017 05:44 ET (09:44 GMT)