DowDuPont Revises Breakup Plan Opposed by Activist Investors

After the realignment, the new materials science company, which is expected to be called Dow, is expected to have about $40 billion in annual revenue. The specialty products business would have about $21 billion in annual sales and the agriculture business would have about $14 billion in annual revenue.Andrew N. Liveris, the DowDuPont executive chairman, said in an interview that the reorganization created a “more focused material company, an exciting specialty products company that will have four distinct, independent business that will have growth because they’re best in breed in each of their market verticals.”“That’s the work we’ve done,” Mr. Liveris said. “If you study any other chemical company out there, they’re still in 30 or 40 markets. There’s been no corporate restructuring of this type, of this value creation, in any sector, let alone the chemicals sector.”Activist investors had criticized the original plan as unwieldy and unfocused, and the hedge fund Third Point had urged in May that the company be split into six, rather than three, businesses. That suggestion was not accepted, but Third Point’s warning that several units might be “stranded” in the new materials science company appears to have had an effect.The merger behind DowDuPont was announced in December 2015, bringing together DuPont, the inventor of Kevlar, which was founded more than 200 years ago, and Dow, a maker of plastics and chemicals that is more than a century old.It has taken nearly two years to complete the transaction as the companies have navigated regulatory concerns.The European Union signed off on the deal in March after the companies agreed to sell off parts of DuPont’s global pesticide business. In June, the United States Justice Department required the companies to sell certain herbicides, insecticides and plastics products in order for the transaction to proceed.

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At the time they announced the transaction, the two companies made clear that they intended to separate the merged company into three. But that plan met opposition from activist investors like the hedge funds Trian Partners and Third Point, which argued that the new companies would each be too large and unfocused.

DowDuPont had been working with the consulting firm McKinsey & Company for several months on the reorganization plan — as part of the merger, a review of the combined company’s operations had been long planned for after regulatory review.“We have better penetration in certain industries, a broader breadth of product for given customers in an industry,” Edward D. Breen, the DowDuPont chief executive, said in an interview.The company’s shares rose 1.9 percent in early trading to $68.13.Trian Partners, the hedge fund run by the billionaire investor Nelson D. Peltz, welcomed the announcement on Tuesday, saying it “fully supports the portfolio adjustments announced today by DowDuPont.”“We commend the company’s management, board and advisers for successfully optimizing the portfolio construction of its three core businesses,” it added. “We believe this is a great outcome for shareholders.”Third Point said it was “pleased to be part of a dialogue that created such a positive outcome for all of DowDuPont’s shareholders.”Glenview Capital Management, another activist firm that called for changes in the breakup proposal, also praised the new plan.Activist investors have gone after some of the world’s biggest companies in recent years as their influence has increased.The upscale grocery chain Whole Foods Market agreed to sell itself to Amazon in June for $13.4 billion as it faced pressure from activist shareholders unhappy with its share price.

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The same month, General Electric announced that Jeffrey R. Immelt, its longtime chief executive, would retire this year. The industrial giant, which has been planning his succession for several years, has been the subject of calls from Mr. Peltz to cut costs and improve its returns.Mr. Peltz’s Trian Partners also has turned its focus this summer to the consumer products giant Procter & Gamble, which was previously targeted by another billionaire investor, William A. Ackman.And in August, Avon Products said that its chief executive, Sherilyn S. McCoy, would step down next year as the company has tried to fend off pressure from activist investors to reshape its management and speed its turnaround.Continue reading the main story