Dow Chemical Co. and DuPont Co. should consider creating six focused companies after their planned merger, twice as many as planned, to improve the investment potential of each, said activist shareholder Dan Loeb.
Changing the composition of the three spinoffs that Dow and DuPont already plan after their US$78.7 billion merger could create US$20 billion of additional value, according to a plan released by New York City-based Third Point LLC, the hedge fund founded by Loeb. Further splitting the proposed companies focused on agriculture, materials, and specialty products would create even more value.
The current plan calls for the combined DowDuPont to be split into three separate public companies, including one focused on materials, within 18 months after the merger becomes official. The Third Point plan suggests that Dow’s silicones business, which were formerly part of Dow Corning, and DuPont’s Tyvek HomeWrap polyolefin film business instead be placed in the specialty products spinoff.
Third Point’s proposal recommends doing the same with most of DuPont’s performance materials unit — except for ethylene copolymers and an ethylene cracker in Orange, Texas. The remainder of DuPont’s performance materials unit — including nylon, acetal, PBT and other specialty plastics — would remain with the materials spinoff, Third Point said.
DowDuPont should then consider breaking up specialty products into four new companies focused on electronic materials, nutrition and biosciences, engineered materials and silicones, Third Point said.
“Dow and DuPont have one chance to fully optimize shareholder value from the merger,” Third Point’s proposal said. “Specialty Products Co. could be split into as many as four public companies to ensure that each ‘Spin Co.’ has a clear focus and compelling investment case.”
The fund, which holds a 1.3 per cent stake in Dow, proposed no changes to the agriculture spinoff.
