Trian Fund Management LP, the hedge fund co-founded by activist Nelson Peltz, boosted its stake in DuPont Co. (DD:US) and met top executives to discuss ways to increase shareholder value, according to people familiar with the matter.
Trian now owns more than 21 million shares of Wilmington, Delaware-based DuPont, said one of the people who asked not to be named because the information isn’t yet public. The stake is valued at about $1.25 billion at yesterday’s closing share price. The New York-based fund-management firm yesterday reported it had 5.78 million shares as of June 30.
In recent weeks Trian has met with Chairman and Chief Executive Officer Ellen Kullman and other senior managers to talk about ideas, which are outlined in a white paper, to drive long-term growth, the people said. The Wall Street Journal reported the talks and higher stake earlier.
Peltz probably is proposing breaking DuPont into two companies, one focused on its agriculture business and the other focused on materials, David Begleiter, a New York-based analyst at Deutsche Bank AG who recommends buying the shares, said in a report today.
Such a plan “does not, in our view, create substantial value,” Begleiter said in the report. DuPont’s businesses in a breakup would be worth $67 a share, he said.
DuPont fell 1.3 percent to $58.60 at 11:45 a.m. in New York. The shares (DD:US) have gained 30 percent this year.
Trian was first reported by CNBC to have “a very big” stake in DuPont on July 17. DuPont subsequently announced it was exploring options for one of its more volatile businesses, performance-chemicals, which makes titanium dioxide pigment, Teflon coatings, Freon refrigerants and chemicals such as cyanide.
“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,” Michael Hanretta, a DuPont spokesman, said in an e-mail yesterday. “We routinely engage with our shareholders and welcome constructive input.”
DuPont, which produces thousands of products such as Kevlar anti-ballistic fiber and genetically modified corn, is weighing a separation of performance chemicals after the unit’s operating profit plunged 56 percent in the second quarter amid a slump in prices for titanium dioxide, a white pigment used in paints and plastics. Before jumping on CNBC’s July report, DuPont shares had gained 30 percent in the past decade (DD:US), trailing the Dow Jones Industrial Average’s 70 percent increase.
Under Kullman’s leadership since 2009, DuPont has continued to shift away from traditional commodity products toward higher-margin businesses that capitalize on meeting global demand for food, energy and security. DuPont sold its auto-paint unit this year to private-equity firm Carlyle Group LP for $4.9 billion, and it acquired food ingredients and enzyme maker Danisco A/S in 2011 for about 33.4 billion kroner ($5.9 billion).
The company this week changed its bylaws to provide payouts to executives fired in a takeover and to alter how special meetings are run.
Kullman, under the company’s newly amended bylaws, would receive three times her annual salary and bonus if fired after a company takeover, and other executives would get twice their compensation. New bylaws also require advance notice for nominating directors or proposing other changes and set Delaware as the jurisdiction for resolving fiduciary duty and shareholder-rights disputes.
Trian successfully pushed Ingersoll-Rand Plc to spin off units last year. Peltz also is pressuring PepsiCo Inc., the world’s largest snack-food maker, to acquire competitor Mondelez International Inc., formerly known as Kraft Foods Inc. In 2006, Trian waged a six-month proxy fight with H.J. Heinz Co. to win seats on the board and persuade management to execute a turnaround plan.
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