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Dow Chemical Co (DOW): Dan Loeb’s Proxy Fight Takes an Interesting Turn of Events

Dan Loeb‘s Third Point has taken some steps regarding Dow Chemical Co (NYSE:DOW) and has formed an advisory board that can help the company to seek measures to increase value. Third Point currently owns 22.0 million shares of the company, the stake amassing less than 2% of the company. The investor also launched a website,, where it will keep the public and other shareholders updated regarding the activity of the company and Third Point’s moves regarding the company.

Third Point

Third Point is the first investor to go activist on the company for more than a decade. Mr. Loeb initiated a position in Dow Chemical Co (NYSE:DOW) during the last quarter of 2013 and disclosed holding around 7.73 million shares. During the first quarter of 2014, the position was edged down by 7% on the quarter, but during the second quarter, Third Point boosted the stake to 22.0 million shares. The fund has not yet reported its equity portfolio for the third quarter and with the recent move, we might see the fund further raising its position. As of the end of the second quarter, Dow Chemical was the largest holding in Third Point’s equity portfolio.

On its new website, Third Point has accused the board of Dow Chemical Co (NYSE:DOW)of underperformance. Among the promises that the company has brokent, the investor mentioned $10 billion in adjusted EBITDA that the company has promised to reach every year since 2009. However, the company reported EBITDA of around $10.6 billion, although in the previous years this value was much much smaller (for example it amounted to $5.6 billion in 2012). Also among other things, the investor accused Dow Chemical of making excuses, while trying to justify why it failed to meet its targets. Dow Chemical has posted relatively solid returns over the last years. Its stock gained 70% since 2009 and the company has increased its dividend to $0.37 from $0.15 per share. However, as Third Point pointed out, the stock still underperformed in comparison with the S&P 500, which grew by 86% over the last five years.

In this way, Third Point considers that its new Advisory Board can help Dow Chemical Co (NYSE:DOW) to increase the value of the company and to outperform its peers by putting the interest of shareholders first. The board consists of two people: R. “Steve” Miller and Raymond J. Milchovich. Mr. Miller has been the chairman of American International Group Inc (NYSE:AIG) since 2010 and Mr. Milchovich is a former CEO of Foster Wheeler AG (NASDAQ:FWLT), serving between 2001 and 2011, during which he led the company through a restructuring process.

Among other shareholders of Dow Chemical Co (NYSE:DOW) is Daniel S. Och‘s OZ Management with around 9.31 million shares as of the end of June and Rob Citrone’s Discovery Capital Management, which increased its stake by 15% during the second quarter to some 9.17 million shares.

Dow Chemical Co (NYSE:DOW) has already issued a response to Third Point’s allegations and moves. The company said that it disagrees with the investor’s position and that its statements do not present a fundamental understanding of the company. Moreover, the company added that its board and management are taking steps that are aimed towards the best interest of long-term investors of the company.

Earlier, during an interview, Chairmand and CEO of Dow Chemical Co (NYSE:DOW), Andrew Liveris, has discussed Dan Loeb’s position and mentioned that the company had been in talks with Third Point, but it has not received any letters directly from them. However, Dow Chemical was one of the main points addressed in Third Point’s letter to investors for the first quarter.

With Mr. Loeb being a tenacious activist investor, who over the years has changed the performance of many companies, such as Yahoo! Inc. (NASDAQ:YHOO), where he contributed to some significant changes that had a positive impact on the company, the proxy fight with Dow Chemical will be an interesting one to follow.

Disclosure: none

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