Third Point's Loeb Suggests Carving DowDuPont Into Six Companies

(Bloomberg) -- 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 $78.7 billion merger could create $20 billion of additional value, according to a presentation posted Wednesday on the website of Third Point, the hedge fund founded by Loeb. Further splitting the proposed companies focused on agriculture, materials and specialty products would create even more value.

“Dow and DuPont have one chance to fully optimize shareholder value from the merger,” Third Point said in the 19-slide presentation. “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.”

Third Point’s presentation marked Loeb’s return as a thorn in the side of Dow Chief Executive Officer Andrew Liveris for the first time since the chemical maker agreed to merge with DuPont. The activist investor began criticizing Dow’s performance in 2014 and advocated for its breakup. 

Liveris said last week he would delay his planned midyear retirement until July 2018 to see the deal through and to serve as chairman of DowDuPont. The companies said earlier this month that the merged entity’s board would review the business composition of each spinoff.

“The two companies are fully aligned regarding the objective of the review,” Dow said in an emailed statement. “We continually solicit and welcome input from our shareholders.”

Proposed Moves

Third Point wants to move high-margin businesses from the materials spinoff into the specialty products unit, including Dow Corning silicones, engineered materials, energy and water solutions and consumer care products, accounting for $3.7 billion of estimated earnings. It would move Tyvek housewrap and solid surfaces with $300 million of earnings into the materials unit.  
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.

The fund, which holds a 1.3 percent stake in Dow, proposed no changes to the agriculture spinoff.