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DuPont: Trian approached Gallogly to join dissident board slate

April 9, 2015
Chemical Value Chain
New DuPont director, and former LyondellBasell CEO, Jim Gallogly was approached by Trian Fund Management (New York) to join the activist hedge fund’s dissident slate for DuPont’s board, according to a new letter released by DuPont. The letter contains a Q&A with Gallogly and Ed Breen, another new DuPont director who was approached by Trian to serve on the fund’s advisory board. DuPont and Trian released dueling letters today, as part of their continued efforts to lobby shareholders on behalf of their director nominees.
 
In the Q&A, Gallogly said that “it was clear they wanted someone to be on their slate who would represent Trian. They wanted a director who would be on ‘their team’ in the boardroom to push Trian’s agenda to break up the company.” Gallogly also said that Trian “wanted their slate to serve in a very operational role. I don’t that is the proper role for a board.” The former LyondellBasell CEO also said that DuPont is undertaking a transformation of the company with a catalyst such LyondellBasell’s bankruptcy filing.
 
Breen, a former CEO of Tyco Interntional, said Trian “seems to employe the same strategy in each of their investments, regardless of the specific facts at hand. Their plan to break up and add leverage to DuPont is part of the playbook they’ve applied to other companies in other industries, and it has produced negative results outside their core competency, which is really the consumer/retail sector.” During his tenure at Tyco, the company was broken into five independent entities, however, Breen says that situation was not analogous to DuPont. “There was no competency to drive a consolidated platform,” he says. “That is not the case at DuPont, where the science capabilities span the whole platform.”
 
Most of Trian’s investments have bene in the consumer/retail sector, although other investments such as financial firms Legg Mason and Lazard saw shareholder returns rise during the period of Trian’s investment. However, Trian’s one previous major investment in chemicals – Chemtura – is a notable exception to this. Trian’s investment in Chemtura occurred in the years immediately prior to the company’s 2009 bankruptcy, and shareholder returns fell by 96% during this period.
 
In addition to the Q&A, DuPont’s shareholder letter restated its argument for the company’s director slate and strategy, including noting that the company’s 266% shareholder return since 2009 has outpaced the S&P 500, and that many DuPont directors have significant managerial and scientific experience. The letter also noted that the current election includes the chairs of several board committees, including lead director Alexander Cutler, whom Trian is attempting to replace. “It is clear that Trian is attempting to dismantle the leadership of your board and remove the chairs of several key committees in an effort to advance their agenda and thwart DuPont’s strategy,” the letter says. DuPont reiterated its claim that Trian’s proposals, including a further break-up of the company, constitute “a high-risk, value-destructive agenda.”
 
Trian, meanwhile, hammered DuPont CEO Ellen Kullman on her recent sales of DuPont stock. Kullman sold 23% of her position in DuPont after a price spike in September, when Trian released a white paper calling for a further break-up of DuPont. Trian also restated its criticism that DuPont’s earnings peaked in 2011, and said its director nominees will “seek to work collaboratively with the board and management to improve DuPont’s performance.”
 
By Vincent Valk
 

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