Commentary: Activist investors step up pressure on chemicals

Break-ups are in fashion in the corporate world, and as activist investors scour the landscape for candidates, large chemical companies with diverse segments are attracting attention.

Trian Partners, led by activist investor Nelson Peltz, is stepping up the pressure on US-based DuPont, pushing for a break-up of the company into two parts – one focused on growth and comprising agriculture, nutrition and health, and industrial biosciences, and the other focused on cash generation, made up of performance materials, safety and protection, electronics and communications.

DuPont is already planning to spin off its performance chemicals segment, which includes titanium dioxide (TiO2) and fluorochemicals.

Earlier in January 2014, hedge fund Third Point, led by activist investor Dan Loeb, called for US-based Dow Chemical to split its commodity chemicals business from specialty chemicals assets. Dow already is carving out its chlorine and epoxy resins businesses.

Activist pressure on large diversified chemical companies to get smaller and more focused to unlock value will not go away anytime soon. In the meantime, expect even more of a focus on ways to enhance shareholder value from chemical company managements.