A growing crowd of activist investors are attempting to derail Dow and DuPont’s plan to spin off their newly merged company into three separate businesses. Instead, four investors are pushing for DowDuPont to break up into as many as six separate businesses.
The investors include Nelson Peltz, a billionaire behind Trian Fund Managment who famously clashed with DuPont in 2015 over board seats.
The companies have gained regulatory approval for the $150 billion merger and hope to finalize the deal this year. Once merged, the existing plan is to break DowDuPont into three businesses: specialty chemicals and agriculture (each headquartered in Delaware) and material sciences (based in Midland, Mich.).
The Wall Street Journal reports that one of the sticking points is Dow Corning, a separate merger between Dow Chemical and Corning Inc. that was announced the same day as the Dow-DuPont deal. Dow Corning’s focus on silicones used in a range of products — from drug delivery patches to laundry detergent — has helped double its earnings in recent years.
Currently the plan is for Dow Corning to become a part of the materials business. But Third Point, one of the investors pushing for change and one of the biggest holders in Dow, released a plan arguing that $20 billion in market revenue could be unleashed if Dow Corning became a part of the specialty chemicals firm, compared to $11.9 billion if it stays in the larger materials unit.
In general, the investors argue that there should be more spinoffs that are leaner and more focused — which could also unlock more shareholder value.
“The sole focus should be on creating the right number of spinoff entities and stocking them with the right assets to position each to create maximum long-term shareholder value, and not on empire-building or ego-massaging by Mr. Liveris or anyone else,” one of the investors told WSJ.
Dow CEO, Andrew Liveris, reportedly called the allegation “BS.”
One of the chief concerns with increasing the number of spinoffs is that smaller companies are more likely to be targeted for takeovers.
Dow and DuPont continue to defend the spinoff plans, but the boards of both companies are reviewing the merger as it moves along.