https://www.wsj.com/articles/dowdupont-to-change-breakup-plan-1505208603
DowDuPont to Change Breakup Plan
Moves bring to end threat of fight with as many as four activist investors
Edward D. Breen (L), chief executive of DowDuPont, and Andrew N. Liveris, executive vice chairman, shake hands in an undated handout photo provided by DuPont. Photo: handout/Reuters
David Benoit
BiographyDavid Benoit
@DaveCBenoit
David.Benoit@wsj.com
Updated Sept. 12, 2017 12:56 pm ET
Two weeks after its formation, DowDuPont Inc. is altering its plan to splinter into three companies, bringing to an end the threat of a fight with as many as four activist investors.
The company, formed by the union of Dow Chemical Co. and DuPont Co. on Aug. 31, has long planned to split into separate companies focused on agriculture, specialty-chemical products and materials. The plan was to break up over 18 months.
The new plan moves businesses with more than $8 billion in annual revenue from the materials spinoff, which is to house the legacy Dow operations and be named Dow, into the specialty-chemical concern.
The move will separate into parts what had been Dow Corning, a pioneer in silicone technology that was taken over by Dow last year, and put some of it into each of the specialty and materials companies. Previously, the silicone business was to be housed entirely in the new Dow, which Dow executives argued was the best fit; that represented the crux of the debate with the activists.
Four Activists Challenge Plans to Carve Up DowDuPont (July 30)
Questions Remain as Dow and DuPont Become DowDuPont (Sept. 1)
Dow, DuPont to Review Breakup Plan After Merger (May 11)
DuPont, Dow Chemical Agree to Merge, Then Break Up (Dec. 11, 2015)
Both the investors and Dow executives appear to have gotten at least some of what they wanted. DowDuPont shares jumped more than 3.5% on the news, first reported by The Wall Street Journal, though recently were up 1.9% to $68.11.
Shareholders, including activists Trian Fund Management LP, Third Point LLC, Glenview Capital Management LLC and Jana Partners LLC, had pressed for a dramatic reshaping of the breakup, particularly as it relates to the silicone business.
Dow Chief Executive Andrew Liveris had said in a July interview with the Journal that "noisy shareholders" were focused too much on short-term results, but added that he was open to any outcome that produced value. Dow executives believe the growth in silicones since Dow took over Dow Corning is evidence of the sales and research opportunities created by putting the two companies together.
Tuesday, Mr. Liveris said he fully supported the changes.
Meanwhile, the investors each applauded the moves, the result of a five-month review led by consultants at McKinsey & Co., which talked with 25 of the biggest shareholders.
"It takes guts for board members to admit they need a do-over, and we're happy the board members here took the time to listen to shareholders and improve their spinoff plans," Jana founder Barry Rosenstein said in an email.
Glenview founder Larry Robbins, who rarely publicly criticizes companies, said in an interview the end result of the review was evidence the "noisy" shareholders were onto the right conclusion.
The new Dow will house products aimed at packaging, infrastructure and consumer care and now have roughly $40 billion in annual revenue, the people said. The specialty-chemical business will focus on electronics and imaging, transportation, construction and nutrition, with some $20 billion in revenue.
The agriculture business, with about $14 billion in revenue, will remain the same.
The review process included directors who made site visits to several company plants and sought to incorporate changes to the markets and the company's portfolio in the nearly two-years since the roughly $60 billion merger and the split were announced in December 2015.
Mr. Liveris, who is executive chairman of the combined company, is in charge of setting up the new Dow, though he will retire next summer.
A merger between Dow Chemical and Dupont, worth $130 billion, will be followed by a three-way break up of the combined company, with a focus on agriculture, material sciences and specialty products. WSJ reporter David Benoit reports. Photo: Getty (Originally Published December 11, 2015)
DuPont's Edward Breen, now CEO of DowDuPont, is in charge of establishing the other two companies and hasn't yet declared his post-split plans.
On a conference call with analysts Tuesday, Mr. Breen left open the possibility of further breakups down the road for the speciality business, which investors and analysts have suggested. When asked about future splits, he said the new structure, based on customers, will set up businesses with a lot of "optionality."
—Dana Mattioli contributed to this article.
Write to David Benoit at david.benoit@wsj.com
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DowDuPont to change breakup plan in a move aimed at appeasing activist investors