Investor Presses for Overhaul of Dow Chemical

Investor Presses for Overhaul of Dow Chemical

Third Point, which is known for campaigns to shake up Yahoo, Sotheby's, Sony and others, pressed Dow Chemical in a letter to consider spinning off its petrochemical assets and to evaluate a "meaningful" share buyback program.

NEW YORK -- Activist hedge fund Third Point said today it built an unspecified stake in Dow Chemical and pressed to overhaul a company that it argued has "woefully underperformed" peers.

Third Point, which is known for campaigns to shake up Yahoo, Sotheby's, Sony and others, pressed Dow Chemical in a letter to consider spinning off its petrochemical assets and to evaluate a "meaningful" share buyback program.

A Dow spokeswoman said the company "routinely monitors and engages with all of its shareholders" to boost shareholder value.

"We believe our investments have yielded sustainable value for our shareholders and will continue to in the near and long term," the spokeswoman said. "We intend to continue an open dialogue to further enhance value for all of our shareholders."

Third Point, which is led by billionaire Dan Loeb, said Dow's comparatively weak return to shareholders over the last decade was the result of a "poor operational track record," a "history of underdelivering" on expectations and an "ill-timed" acquisition during the financial crisis.

Third Point called for the company to hire outside advisers to review whether "separating Dow's petrochemical business via a spin-off would drive greater stakeholder value."

Divestment: Logical but Insufficient

In December, Dow announced plans to carve out for divestment $5 billion in chlorine assets as part of a strategy to reduce holdings in commodity chemicals and build its reputation in higher-returning specialty products.

Third Point praised the "intelligent logic" of Dow's announcement on chlorine assets, but said the company should go further by creating a stand-alone company in commodity petrochemicals.

Such a split "would accelerate Dow's transition to a true 'specialty chemicals' company focused on attractive end-markets such as agriculture, food, pharmaceuticals, and electronics," Third Point said.

The spin-off would also shift the focus away from integrating the company's commodity assets with its specialty holdings and toward an emphasis on "overall profit maximization," Third Point said.

Dow shares were up 3.7% in late-morning trade in New York.

Copyright Agence France-Presse, 2014

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