Activist Wants DuPont Split in Two
Activist investor Nelson Peltz's Trian Fund Management LP, among the biggest shareholders in DuPont , has called on the chemical conglomerate to separate its high-growth businesses from those that generate strong cash flows.
DuPont's shares rose 4 percent in premarket trading.
Trian Fund, which holds a $1.6 billion stake in DuPont, wants the company to split into two - one holding its fast-growing agriculture, nutrition and health and industrial biosciences divisions.
The other will hold its cyclical businesses such as performance materials, safety and protection, electronics and communications.
DuPont is already hiving off its performance chemical business, which makes materials used in non-stick cookware, refrigerants and a white pigment used in toothpastes.
The company has also announced a $5 billion share repurchase program. But Trian Fund said these steps were not enough.
"While we applaud the announced spin-off of Performance Chemicals, the Fresh Start initiative and the $5 billion share buy back authorization, we believe strongly that, by themselves, these moves are not enough to optimize shareholder value," Trian Fund said in a Sept. 16 letter to DuPont's board released on Wednesday.
Peltz, who first disclosed his stake last year and had been in discussion with the company for more than a year, said in the letter that he would begin to meet with other shareholders.
Peltz has been the force behind some large splits in the food industry. He had a role in the breakup of Cadbury Schweppes into Dr Pepper Snapple Group and Cadbury, and was involved in the subsequent purchase of Cadbury by Kraft. He then played a role in breaking up Kraft into Kraft Foods Group Inc and Mondelez International Inc.
Peltz's stake in DuPont would translate into 24.3 million shares based on the stock's Tuesday close of $65.83, making Trian Fund the sixth largest shareholder, according to Thomson Reuters data.
Peltz said his proposal would eliminate $2 billion to $4 billion in annual costs and double the value of DuPont's shares over the next three years, saying the company's conglomerate structure was "destroying value."
DuPont shares are trading at nearly 15 times its 12-month forward earnings, lagging those of seed maker Monsanto Co , which is trading at 19 times. The stock trades at a premium to chemicals maker BASF Se, whose shares are trading at about 12 times earnings.
DuPont has justified keep its businesses together, citing pooled research and development costs and benefits from cross-selling.
The company said late on Tuesday that it welcomed open communications with shareholders, after the Wall Street Journal reported on Trian Fund's letter.
DuPont's shares were trading at $68.50 before the bell. Up to Tuesday's close, the shares had risen more than 10 percent in the past 12 months.