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DuPont shares soar on report that activist investor Trian has purchased stake

6:52 AM MDT | July 23, 2013 | Robert Westervelt

DuPont shares soared 5.3% on 17 July after reports that activist investment firm Trian Fund Management (New York) has acquired a large stake in the company. The investment was first reported Andrew Ross Sorkin, a reporter with the New York Times and CNBC, at the CNBC-Institutional Investor Delivering Alpha Conference today in New York. Trian's CEO is activist investor Nelson Peltz.

When asked by Sorkin for details on the DuPont investment Peltz declined comment apart from a cryptic “paint” reference. "You asked me in the green room about 10 minutes ago: 'If you say DuPont, what comes to mind?’," Peltz told Sorkin. “Remember what I told you? I said: 'Paint.' That's all you're going to get today." DuPont declined comment on the report.

In February, DuPont sold its coatings business to Carlyle but still operates the world’s largest titanium dioxide (TiO2) white pigments business. TiO2 is part of DuPont’s performance chemicals unit, which also includes fluorochemicals, and specialty and industrial chemicals. The performance chemicals unit posted 2012 net sales of $6.9 billion, 20% of DuPont’s total net sales, and pre-tax operating income (PTOI) of $1.6 billion, 33% of total DuPont PTOI last year. Performance chemicals performance results have deteriorated since second-half 2012, however, due to falling TiO2 margins. First-quarter 2013 performance chemicals PTOI fell 56% year-over-year, to $251 million in on weak TiO2 results. Segment revenues fell 17%, to $1.9 billion, in the first quarter.

Trian says its investment “strategy involves investing in public companies with attractive business models that Trian believes trade significantly below intrinsic value due to operating underperformance.” The investment firm has published “white papers” on some of its investments, including Pepsico and Danone, offering guidance on how management can “enhance shareholder value through a combination of strategic redirection, improved operational execution, more efficient capital allocation and sharpened focus.” Trian today called on Pepsico to separate its beverages and snacks business. Ingersoll-Rand agreed in late 2012 to spin off certain businesses under pressure from Trian. 

Peltz and Trian have chemical industry experience. In 1986, Avery Inc., controlled by an investment group led by Peltz, purchased the chemical operations of Uniroyal in a leveraged buyout. Uniroyal Chemical was sold by Avery via a management-led buyout in 1989. Uniroyal was subsequently acquired by Crompton & Knowles in 1996, a predecessor to Chemtura. Trian also acquired a large stake in and gained a board seat at Chemtura in 2007.

DuPont shares rose 5.3% on 17 July to close at $57.25/share, the highest closing price since February 2000. DuPont is scheduled to report second-quarter earnings on 23 July. 













 
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