Investor Nelson Peltz campaigns for DuPont breakup
WILMINGTON, Del. — An activist investor is campaigning for DuPont to break itself up after he said the company's management declined to act on his proposed changes.
Nelson Peltz of Trian Fund Management working to gather support among investors for his plan after gaining a $1.6 billion stake in the company, according to a memo that Trian sent the DuPont board that was released on Trian's website Wednesday morning.
Peltz has argued that the company is too complicated, with businesses that are too different from each other.
According to the release from Trian: "DuPont's conglomerate structure is destroying shareholder value" and should be broken into smaller companies.
DuPont, in a statement released Wednesday, defended its governance, stating they "have taken firm action over several years that has delivered 220 percent total shareholder return since year-end 2008," higher than the S&P 500 during the same period.
Trian, in the letter, stated it has "engaged in a private dialogue for more than a year with DuPont's management and the Lead Director regarding specific initiatives we believe can significantly improve the Company's financial performance."
Trian applauded the company's efforts to spin off Performance Chemicals, and its efforts to streamline its operations, but "we believe strongly that, by themselves, these moves are not enough to optimize shareholder value."
"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 suggested separating DuPont into a company with agriculture, nutrition and health and industrial biosciences, and another with performance materials, safety and nutrition, and electronics and communications. That's in addition to the existing plan to spin off performance chemicals.
The company has excessive corporate costs, including its country club, theater and hotel, Trian wrote. The company's complexity and disparate businesses have, Trian wrote, "rendered the management team incapable of meeting its own guidance."
The letter outlined what it saw as a series of missteps, noting that after selling its performance coatings company, that new company, Axalta, has been much more profitable.
After its acquisition of Danisco in 2011, that sector of DuPont's business has seen less revenue growth than it had before DuPont acquired it, according to the letter.
"Since 1998, DuPont has been in a state of perpetual transformation — having divested or separated businesses generating more than $40 billion of revenue and acquired businesses generating nearly $12 billion of revenue — yet 16 years later, the stock price has declined 21% from its 1998 peak," according to the letter.
DuPont, according to its statement, "welcomes open communications with shareholders and values input toward our common goal of enhancing shareholder value." The company does not comment on specific discussions, but "we have had constructive dialogue with Trian."
The letter was first reported in the Wall Street Journal on Wednesday morning.