17:39 PM | August 15, 2013 | Robert Westervelt
Trian Fund Management, led by activist investor CEO Nelson Peltz, has acquired a 2.3% stake in DuPont and has met with company management to outline possible strategic changes, according to a person familiar with the matter. Trian currently holds more 21 than million DuPont shares, according to the person. Sources say Trian has met with DuPont chair and CEO Ellen Kullman, as well as other senior management, and has presented the company with a white paper containing strategic changes to increase shareholder value.
Trian reported holding 5.8 million DuPont shares, a 0.6% stake, at the end of the second quarter in regulatory filings on 14 August. That stake has since increased to 21 million shares, valued at roughly $1.2 billion at today’s 1 p.m. share price, sources add. DuPont shares spiked more than 5% on 17 July after CNBC reports that Trian had acquired a large stake in the company.
“We are aware of Trian’s investment and, as always, we routinely engage with our shareholders and welcome constructive input,” a DuPont spokesperson says. “We will evaluate any ideas Trian may have in the context of our ongoing initiatives to build a higher-value, higher-growth company for our shareholders.”
The investment comes as DuPont prepares to sell or spin off its $7-billion/year performance chemicals unit, which includes titanium dioxide, fluorochemicals, and specialty and industrial chemicals. DuPont says the review, announced 23 July, is part of its transformation to a “higher-growth, less cyclical company.” DuPont earlier this week adopted a cash payout severance plan for senior executives fired following a company takeover and also changed company bylaws regarding advance notice of shareholder meetings and nominations.
Trian’s Web site states that the company’s “[investment] strategy involves investing in public companies with attractive business models that Trian believes trade significantly below intrinsic value due to operating underperformance.” The firm has published white papers on other investments, offering guidances on how managements can “enhance shareholder value through a combination of strategic redirection, improved operational execution, more efficient capital allocation, and sharpened focus.” Ingersoll-Rand agreed in late 2012 to spin off certain businesses under pressure from Trian, and the company last month called on PepsiCo to separate its beverages and snacks business.
Peltz and Trian have some chemical industry history. In 1986, Avery, controlled by an investment group led by Peltz, purchased the chemical operations of Uniroyal in a leveraged buyout. Peltz subsequently became CEO of Avery. Uniroyal Chemical was sold by Avery as part of a management-led buyout in 1989. Uniroyal was subsequently acquired by Crompton & Knowles in 1996, a predecessor to Chemtura. Trian would later acquire a large stake in Chemtura in 2007.