A day in the life of an “activist” fund

ManhattanDow rightA prominent “activist” fund in New York has told Dow Chemical to spin off its performance plastics, performance materials and feedstocks-and-energy units.  The news led the blog to imagine a fictional scene in the offices of Activists-R-Us fund last Tuesday morning, as the news came through.  Any resemblance to actual events is purely coincidental, as they say in movies.

Activists-R-Us Fund Owner:  Morning boys, and Happy New Year to me.  How are we going to make buckets of money in 2014?  What have you got for me?
Activists-R-Us Fund Managers.  Good morning, sir, and Happy New Year to you.  Hope you enjoyed the extended Caribbean cruise in your new yacht, sir.
Owner:  There were some yachts in the harbour with a landing pad for helicopters.  I need one of those.
Managers:  We had a call this morning about a company called Dow Chemical, sir, and we’ve been researching it.
Owner:  “Chemical”, comical, what’s that?  What does it do?
Managers:  We’ve been researching it, sir, before you arrived.  Its in Wikipedia and seems to make plastics, sir.
Owner:  Plastics?  Oh, yeah, I know plastics.  That’s the movie with Dustin Hoffman, isn’t it?  The Graduate.  “Go into plastics” they told him.  Well, if its good enough for Dustin, its good enough for me.  What’s the story?
Managers:  It seems their plastics business has been making buckets of money out of this shale gas thing that people have been finding everywhere. They somehow turn it into plastics.  We haven’t quite worked out that bit, yet.  But the numbers look good according to the Wall Street Journal.  Over $28bn revenue in the first 9 months.
Owner:  So what about the call you got on it?
Managers:  Well, it seems the grapevine thinks we should all be going after them.  You know, the usual spin-out story.  Give us the money now, or we blow your brains to bits.
Owner:  Sounds good to me.  How much are we talking?
Managers:  The share price was down at $7 in March 2009, and now its $45 this morning.  Management seems to have done a great job.  Boss on a presidential working party, everything you’d want for credibility.  So there’s plenty of cash there for us to target.
Owner:  Okay, boys.  Call your friend back and tell him that we’re in for the ride.
Managers:  Got it, sir.
Owner:  And remember, when this little beauty delivers, its treble bonuses for all you.  That new apartment in midtown Manhattan that your wife wants, along the block from here, you’ll get it.
Managers:  Thank you, sir!

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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