Activist investor Nelson Peltz, whose Trian Fund Management LP pushes big companies to boost share values by buying or selling major operations, will likely lean on DuPont Co. to split the firm into separate companies focusing on (1) farm pesticides, biosciences and health products and (2) chemical, electronics and safety products, according to a new report by Deutsche Bank analyst David Begleiter. Trian yesterday confirmed it has purchased around 1% of DuPont shares, so far.
But Begleiter, like other analysts (for examle Citi's P.J. Jukevar), says merely breaking up DuPont other companies wouldn't likely boost the share value too far above its recent highs in the upper $50s a share. He also said Peltz was less likely to push the company to borrow heavily to try and prop up its share prices.
Peltz's firm "successfully pushed Ingersoll-Rand, Plc to spin off units last year," writes Bloomberg here. "Peltz also is pressuring PepsiCo Inc., the world’s largest snack-food maker and second-biggest soda producer, to acquire competitor Mondelez International Inc., formerly known as Kraft Foods Inc." Before the 2008 recession, Trian waged a proxy fight with H.J. Heinz Co., to take over board seats and push for a restructuring. More recently, Heinz was purchased by Nebraska billionaire Warren Buffett's Berkshire Hathaway Inc., which has been cutting jobs at the ketchup and condiment giant's Pittsburgh headquarters.
Break-ups worked for Tyco International, the multinational conglomerate based in suburban Trenton, which under past chief executive Ed Breen split off five major divisions, enriching shareholders, after investors failed to offer a premium for the Breen's financial and management value-added. Breen planned long and carefully for the split. DuPont has given no sign it is interested in, or prepared for, a major separation, though it has agreed to shop some businesses.
DuPont boss Ellen Kullman's board responded to the threat of a takeover by taking quick steps to give her and her top lieutenants fat financial incentives to stay at her job. According to the company's Aug. 12 filing with the Securities and Excange Commission, DuPont adopted a "Senior Executive Severance Plan, which ensures that bosses fired after a "change in control" will get a sweet good-bye package including up to three times their annual salary and target bonus, up to three years in health and tax benefits, as long as they promise not to say anything nasty about the company or the buyer. Read the sweetener here.