Both sides can claim to have drawn blood in the early stages of what is shaping up to be a contentious proxy fight between E. I. du Pont de Nemours and Company (NYSE: DD), and Nelson Peltz’s Trian Partners, the activist hedge fund which owns 24.3 million shares of the 212-year-old chemicals giant, a 2.9% stake worth just under $2 billion.
Trian Partners is an activist hedge fund which focuses on increasing value in a small number of holdings. Their 13F equity portfolio was valued at $9.4 billion as of December 31, though it held just 11 holdings. While Trian has generally settled with companies it has had disputes with, including Family Dollar Stores, Inc. (NYSE:FDO), whose eventual merger with Dollar Tree, Inc. (NASDAQ:DLTR) benefited Trian greatly, it did run a successful proxy fight against H.J. Heinz Company (NYSE:HNZ) back in 2006, winning five seats on that company’s board, and being credited with the turnaround that would ultimately lead to them being sold for a 25% premium in 2013.
In E. I. du Pont de Nemours and Company (NYSE: DD), Trian is attempting to break up a corporate giant in such a way that the New York Times recently declared it could be where corporate America draws the line as far as the growing influence activist hedge funds have had over their affairs. This is primarily due to the success DuPont has enjoyed over the past few years, with a stock that is up over 130% over the last five years. Of course that is somewhat of a red herring, as a well-performing stock does not automatically mean the company is performing to their full capacity or achieving their maximum value.
Trian Partners first took an activist position in E. I. du Pont de Nemours and Company (NYSE: DD) during the second quarter of 2013. Over the next year they held private discussions with the company, urging them to break into twain. Trian claimed they had become an overly large and unfocused company, with ponderous overhead, one that was not providing shareholders with proper value. DuPont refused their overtures, and Trian eventually went public with their pleas in late 2014.
On January 9, it was revealed that Trian had nominated four directors to the board of DuPont, including Peltz himself, and that they had cited numerous reasons for DuPont’s underperformance, including excessive overhead and lack of upper management accountability. DuPont again refused, and yesterday announced the appointment of two new directors to their board, neither of which were among the four nominated by Trian.
In a statement of their own filed after E. I. du Pont de Nemours and Company (NYSE: DD)’s announcement, Trian declared a small victory in that DuPont made necessary changes to their board, and even offered reserved praise for their choice of directors, which were Edward Breen, chairman of Tyco International PLC, and James Gallogly, a former chief executive of LyondellBasell Industries NV (NYSE:LYB). DuPont even offered a seat to one of Trian’s four nominees, excluding Peltz.
However Trian in their statement did not accept the overture, and insisted on the appointment of Peltz and their other nominees, making the claim that Peltz is wanted on the board by other shareholders, and that his presence in the company from early 2013 has been largely responsible for their 50% rise in share price, even as the company’s earnings per share have continually slid and the company has missed its guidance for three straight years.