DowDuPont al­ters post-merger breakup plans amid in­vestor pres­sure

Business World - - WORLD BUSINESS -

NEW YORK — DowDuPont, formed through the merger of chem­i­cal gi­ants Dow Chem­i­cal and DuPont, is shift­ing some op­er­a­tions in the three units it plans to cre­ate, po­ten­tially avert­ing a pro­longed fight with ac­tivist in­vestors over its post­merger plans.

Dow and DuPont will split into three com­pa­nies fo­cus­ing on agri­cul­ture, spe­cialty chem­i­cals and ma­te­ri­als, but some in­vestors in­clud­ing Nel­son Peltz’s Trian Part­ners and Daniel Loeb’s Third Point LLC urged the com­pa­nies to take an­other look at the way busi­ness units are aligned.

The com­pany said on Tues­day its would now move busi­nesses to­tal­ing more than $ 8 bil­lion in an­nual sales from its ma­te­ri­als science di­vi­sion to the spe­cialty- chem­i­cal unit, in­clud­ing wa­ter pu­rifi­ca­tion and au­to­mo­tive sys­tems.

“We ex­pect that this up­dated port­fo­lio was seen by legacy Dow as the bare min­i­mum to avoid an ac­tivist fight,” Bern­stein an­a­lyst Jonas Ox­gaard wrote in a client note.

DowDuPont’s shares rose 2.5% on the New York Stock Ex­change in late-af­ter­noon trad­ing.

The changes were the re­sult of a four- month re­view led by con­sul­tancy firm McKin­sey & Co., which talked to 25 of the com­pany’s big­gest share­hold­ers, An­drew Liveris, ex­ec­u­tive chair­man of the com­bined com­pany said in an in­ter­view. Mr. Liveris was for­merly chief ex­ec­u­tive of Dow, and is set to re­tire from DowDuPont next year.

Loeb’s Third Point, which has been crit­i­cal of Mr. Liveris’ lead­er­ship, said in May the com­pa­nies could un­lock $ 20 bil­lion in ad­di­tional value by tweak­ing the orig­i­nal spinoff plan.

As part of the re­vised plan, DowDuPont will split the old Dow Corn­ing and dis­trib­ute its lu­cra­tive sil­i­cone busi­ness among the ma­te­ri­als and spe­cialty com­pa­nies.

Ear­lier, this busi­ness was ex­pected to stay un­der the ma­te­ri­als science di­vi­sion — which will acc- ount for more legacy Dow busi­nesses and re­tain the Dow brand. The busi­ness pro­duces sil­i­con- based prod­ucts for aero­space, au­to­mo­tive and elec­tri­cal in­dus­tries.

The ma­te­ri­als science com­pany will be the big­gest in terms of rev­enue gen­er­a­tion, Mr. Liveris said, fol­lowed by the chem­i­cals and agri­cul­ture busi­nesses.

Mr. Peltz’s Trian said it fully sup­ports the port­fo­lio ad­just­ments an­nounced by DowDuPont.

“Since we first be­came in­volved in the merger dis­cus­sions in Novem­ber 2015, we planned to help the com­pany ex­e­cute this crit­i­cal re­view at the ap­pro­pri­ate time. We be­lieve this is a great out­come for share­hold­ers.”

The merger is ex­pected to save around $ 3 bil­lion for the com­pa­nies.

Mi­nor­ity share­holder Glen­view Cap­i­tal Man­age­ment said DowDuPont’s move was “an im­por­tant first step” but leaves the com­pany sig­nif­i­cantly un­der­val­ued, and rec­om­mended share buy­backs. —

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