NEW YORK -- Trian Partners, which is led by activist Nelson Peltz, called Wednesday for the breakup of the centuries-old chemical and agricultural seed company DuPont (IW 500/37), arguing that its "conglomerate" structure has led to excessive costs and underperformance.
Trian Partners holds $1.6 billion in DuPont shares, said it was taking its case to shareholders after concluding that the board "is not willing to hold management accountable" for poor performance and missed profit targets.
"Since 1998, DuPont has been in a state of perpetual transformation -- having divested or separated businesses generating more than $40 billion in revenue and acquired businesses generating nearly $12 billion in revenue," the letter said.
"Yet 16 years later, the stock price has declined 21% from its 1998 peak."
Trian blasted DuPont for excessive costs, including some $1 billion in expenses for such items as the maintenance of a country club and a 217-room hotel.
Trian criticized a 2012 move to divest its coatings business to private equity, rather than spinning it off to shareholders, robbing stockholders of some $6.8 billion in value.
The asset management firm praised some recent DuPont measures, such as a plan to spin off its Performance Chemicals division and authorize $5 billion in share buybacks, but said they did not go far enough.
Instead, DuPont should split itself into companies focused on growth and cyclical businesses, cut costs, enhance capital allocation efforts and improve transparency in corporate reporting. These changes "have the potential to double the value of DuPont's stock over the next three years," Trian said.
DuPont, a company that dates to 1802 and one of the Dow's 30 blue-chip stocks, said in a statement it has had a "constructive dialogue" with Trian and "welcomes open communications with shareholders and values input toward our common goal of enhancing shareholder value."
The company, led by chief executive Ellen Kullman since 2009, lauded the "recently announced first phase" of its redesign, which includes cutting costs by $1 billion, the Performance Chemicals spin-off and the $5 billion share repurchase program.
"Our board of directors and management team have taken firm action over several years that has delivered 220% total shareholder return since year-end 2008, compared to 144% for the S&P 500 during the same period, by aggressively deploying our leading science across the company, strengthening and fine-tuning our portfolio, and through disciplined capital allocation."
Copyright Agence France-Presse, 2014
