Activist investor calls for DuPont break-up

LONDON (ICIS)–An activist investor with a $1.6bn stake in DuPont on Wednesday called for the US-based chemicals giant to break up, claiming that its conglomerate structure is “destroying shareholder value”.

Investment group Trian Fund Management has called for DuPont to be split in two, with its agriculture, nutrition and health, and industrial biosciences operations going into a “GrowthCo”, while performance materials, safety and protection and electronics and communications operations should be spun into a separate unit.

The current structure causes the business to be undervalued, Trian added.

DuPont has retorted that it has delivered 220% total shareholder return since year-end 2008, compared to an average of 144% for the S&P 500 index over the same time.

Trian claims that, even in light of DuPont’s plans to spin off its performance chemicals division, the company is still dogged by excessive holding company costs, a lack of particular end market focus, bureaucracy and an inefficient capital structure, which have contributed to a discount on its share price.

The firm added that it has discussed its concerns privately with DuPont management over the last 12 months.

“We would have preferred to continue working privately with management and the board, but it is now clear that the board is not willing to hold management accountable for continuing underperformance and repeated failures to deliver promised revenue and earnings targets,” Trian said in a public letter to DuPont.

Trian has also called for commitment to the elimination of unnecessary holding company costs, which it estimates at $2-4bn, and a capital allocation policy the firm describes as more shareholder friendly.

“While we applaud the announced spin-off of performance chemicals, the Fresh Start initiative and the $5bn share buyback authorisation, we believe strongly that, by themselves, these moves are not enough to optimize shareholder value,” Trian said.

“We speak and meet with shareholders frequently, and while it is our policy not to comment on discussions with specific shareholders, we have had a constructive dialogue with Trian,” DuPont added.