Activist investor proposes new structure for DowDuPont spinoffs

24 May 2017 20:10 Source:ICIS News

Activist investor proposes new structure for DowDuPont spinoffsHOUSTON (ICIS)--Activist investor Dan Loeb recommended that DowDuPont should adopt a different structure for the subsequent spinoffs of the merger company, according to documents available on Wednesday.

In all, the proposed structure should create about $20bn in additional value, said Loeb of Third Point Management.

The merger between Dow Chemical and DuPont is still pending approval from various regulators. The companies expect the deal to close by September.

In the following 18 months, the merged DowDuiPont will spin off the resulting agriculture, material science and specialty products businesses, with material science the first business to go.

However, the current spin-off plan leaves several high-value businesses within the material-science spin-off, Loeb said.

As a result, these high-value businesses would trade at valuations similar to lower-value commodity businesses, Loeb said.

His proposal attempts to resolve this problem, as shown in the organisational chart below. It compares the DowDuPont spin-off plan with Loeb's.

source: Third Pont Management

Source: Third Point Management

Among the differences is the division of the special-products business into four segments: electronic specialities, nutrition and biosciences, specialty materials and Dow Corning.

This additional segmentation of specialty products could allow these units to be spun off as focused public companies, Loeb said. Those additional spin-offs could earn more money for shareholders.

Dow and DuPont each responded by saying that their respective boards had agreed to conduct a comprehensive review of the business composition of each division. Both companies welcome comments from their shareholders.

The image above shows US currency. Source: Isopix/REX/Shutterstock

By Al Greenwood