Dow Chemical and activist hedge fund Third Point (New York) have reached an agreement on the composition of Dow’s board, averting a brewing proxy fight. Dow will name Raymond Milchovich and R. Steve Miller – candidates Third Point has pushed, both publicly and in private discussions – as well as Richard Davis and Mark Loughridge to its board. Milcovich, Miller and Loughridge will join the board on 1 January 2015, with Davis following in May. All four will be among Dow’s slate of nominees for its board at the company’s 2015 annual shareholder meeting.
Third Point has been publicly critical of Dow management for months, including calling on the company to spin off its petrochemicals business. Dow and Third Point have been in discussions about board seats for the past several weeks, according to a source close to the situation. Dow had initially rejected Third Point’s proposed candidates, including Miller and Milchovich, the source says. Third Point had also threatened to put up its CEO, Daniel Loeb, as a candidate for Dow’s board, sources say.
Miller is the non-executive chairman of insurance giant AIG, and a former CEO of aviation company Hawker Beechcraft, while Milchovich is a former chairman and CEO of Foster Wheeler. Davis is chairman and CEO of US Bancorp, a bank, while Loughridge if a former CFO of computer giant IBM. Miller and Milchovich have both received cash payments from Third Point, which could total as much as $500,000 each. Third Point has agreed to support Dow’s slate of nominees at the 2015 annual meeting, which will include Miller, Milchovich, Davis, and Loughridge.
Third Point owns a 1.87% stake in Dow, valued at about $1.15 billion, or 22 million shares, according to SEC filings. It also holds a stake in CF Industries, and had previously held a stake in FMC.
The agreement with Third Point increases the size of Dow’s board from ten to thirteen members. However, Dow says it will to reduce the size of the board to 12 members sometime before its 2016 annual shareholder meeting.
By Vincent Valk