news of the week M AY 1 8, 201 5 EDITED BY WILLIAM G. SCHULZ & MITCH A. GARCIA
BUSINESS: Trian comes up short in its
bid to unseat four DuPont directors
E
LLEN J. KULLMAN WON. At DuPont’s annual
meeting of shareholders in Wilmington, Del., last week, Kullman, the firm’s chairwoman and chief executive officer, successfully headed off a bid from activist investor Nelson Peltz to install four of his choices for director on DuPont’s board. Instead, DuPont’s complete slate of 12 directors was reelected. Peltz, who runs Trian Partners, a hedge fund that owns a 2.7% stake in DuPont, failed to win a single seat, including one for himself. “The people at DuPont will ensure that our future will match the legacy of our exceptional history,” Kullman said to attendees following the vote. Huddled with reporters in the back of the room after the proxy vote was announced, Peltz attributed his defeat to DuPont’s superior messaging in advance of the meeting. “They probably did a better job with the press,” he said. Peltz accused DuPont of branding him a corporate raider who would burden the company with debt and cut R&D. Kullman said DuPont spent $15 million on the effort to fend off Trian. Peltz said Trian spent about $8 million. Since he amassed his stake in DuPont two years ago, Peltz has been vocal about what he sees as a number of management shortfalls at the company: Bulky overhead hampers DuPont with too many costs. The company has failed to increase earnings in recent years. And management has made missteps, such as its purchase of the food ingredient maker Danisco, which Peltz says has diluted earnings. Outside commentators saw the fight, one of the largest proxy battles in corporate history, as more than a mere showdown between a chemical company and a big, disgruntled shareholder. “The DuPont proxy vote is a part of a battle for the soul of corporate America,” wrote Bill George, a Harvard Business School professor and former Medtronic CEO, on his blog earlier last week before the meeting. George has worried that activist investors gut R&D and promote short-term focus at companies. “If DuPont gets broken up and its central research labs shut down, it will mark the loss of a national treasure, just as it did the demise of the famed Bell Labs,” he wrote.
Peltz also advocated breaking DuPont up further than Kullman’s planned spin-off of the Chemours performance chemical business. He proposed separating some of DuPont’s remaining chemical-oriented businesses, such as engineering polymers, from its agriculture and food-related businesses. Peltz and Kullman both noted that DuPont has an unusual number of individual and retiree shareholders. Such small investors were a significant presence among the 400 people who attended the meeting on DuPont’s Chestnut Run campus. With most of the voting done beforehand, only about a dozen people actually cast their votes in person. The crowd erupted in applause when the results were announced. Peltz wouldn’t say whether he will sell his stake now that he has been denied seats on DuPont’s board. He
Peltz (left) and Kullman shake hands before DuPont’s annual shareholders’ meeting. DUPONT
DUPONT FENDS OFF ACTIVIST CHALLENGE
noted that Trian will file regulatory disclosures containing this information in six months. In a note to clients after the meeting, Deutsche Bank analyst David Begleiter wrote that if Trian doesn’t sell its stake “they will likely continue to exert pressure on DuPont to cut costs, improve operations, and optimize the portfolio.” He expects that DuPont will, indeed, make more changes to its mix of businesses. UBS analyst John Roberts noted that DuPont—no longer under direct assault from Trian—can pursue modest changes. “Management can now focus on bolton deals, and further portfolio pruning like the Chemours spin-off, without having to revisit the complete split-up that DuPont’s board has already reviewed.” Kullman, for her part, said she had learned something from her experience. “We as a company don’t tell our story well enough,” she said.—ALEX TULLO
CEN.ACS.ORG
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MAY 1 8, 2015
