Nelson Peltz’s Trian Partners and Rehan Jaffer‘s H Partners Management have each received important backing in their respective proxy fights from influential proxy advisory firm Institutional Shareholder Service (ISS). In Trian’s case, the advisory firm this week urged shareholders to vote for two of Trian’s director nominees for the board of E I Du Pont De Nemours And Co (NYSE:DD), including Peltz himself, while withholding their votes for Trian’s other two nominees and the nominees put forward by DuPont. In the case of H Partners, ISS also urged Tempur Sealy International Inc (NYSE:TPX) shareholders to vote along with the fund for the removal of the company’s chairman, chief executive, and one other director and the advisory has received the support of two other firms, Glass Lewis & Co. and Proxy Mosaic, LLC.
We’ll start with the contentious proxy battle between Peltz and E I Du Pont De Nemours And Co (NYSE:DD), which dates back to earlier this year after Peltz, who owns more than 24.3 million shares, nominated four directors t0 the board of the chemicals giant and tried to pursue a split of the company. Among other things the billionaire activist investor expressed disappointment with DuPont’s sliding earnings and missed targets, its limited organic growth compared to its peers in multiple sectors, and the unaccountability of its management; factors which have led to it being one of the least popular Dow stocks.
Trian was rebuffed by DuPont, which nominated its own candidates instead, and countered that its results during a turnaround period have been strong. The stock of E I Du Pont De Nemours And Co (NYSE:DD) is up by more than 67% since the start of 2013. Furthermore, after a lengthy presentation by Trian that claimed splitting the company would result in significant cost-savings, DuPont countered with its own presentation, which blasted Trian’s claims, saying such a split would cost the company billions.
In its analysis of the proxy fight, ISS sided with Trian in saying that the company has underperformed and that the strong stock is not being driven by fundamentals. It further agreed that rather than be held accountable and seek solutions for its operating deficiencies, the board has instead continued to cloud over issues in its communication with shareholders. While ISS did not definitely state that DuPont should or should not be broken up, it believes that the board does need a shakeup to address some the governance issues plaguing the company.
In its own response to ISS’s decision and statements, DuPont insisted that ISS reached the wrong conclusion and that it didn’t factor in elements such as Trian’s potential value-destructive breakup plans. Shares of DuPont have made big gains this week, however, showing a positive sentiment on Peltz’s side when it comes to shareholders, who will cast their proxy votes at DuPont’s Annual Meeting on May 13. Among those shareholders are Phill Gross and Robert Atchinson’s Adage Capital Management and John A. Levin’s Levin Capital Strategies.