Hedge fund Third Point calls for Dow to consider spin-off of petrochemicals

Hedge fund Third Point LLC has taken a stake in Dow Chemical and urged management to evaluate a spinoff of its petrochemical operations.  

In a Jan. 21 letter to investors, Third Point CEO Daniel Loeb called on Dow to hire advisors to conduct an assessment of whether its current petrochemical strategy maximizes profits and aligns with Dow’s goal of transforming into a specialty chemicals company. “We believe that Dow would best serve shareholders’ interests by engaging outside advisors to conduct a formal assessment of whether the current petrochemical operational strategy maximizes profits and if these businesses align with Dow’s goal of transforming into a “specialty” chemicals company,” Loeb said. “The review should explicitly explore whether separating Dow’s petrochemical businesses via a spin-off would drive greater stakeholder value.”

New York-based Third Point did not disclose the actual size of the stake, but revealed that Dow is now its largest current investment.

In a statement, Dow officials said the company welcomes “all constructive input with a common goal of enhancing long-term value” for shareholders. “We believe our investments have yielded sustainable value for our shareholders and will continue to in the near and long term,” they said. “We constantly review our company at the management and board level to increase our shareholder value and competitiveness. We intend to continue an open dialogue to further enhance value for all of our shareholders.”

Midland, Mich.-based Dow announced plans to spin off or sell most of its chlorine value chain businesses in December 2013, including epoxy and units that make PVC feedstocks. Those businesses have annual sales of about US$5 billion.