Nelson Peltz’s Trian Fund Management nominated four directors to DuPont’s (DD) board yesterday, setting up a proxy-battle extraordinaire. Deutsche Bank’s David Begleiter considers the implications:
Mark Lennihan/Associated Press Ellen Kullman, chair of the board and chief executive officer of DuPont In September Trian sent a letter to DuPont's board stating that it would seek support from other investors for a break-up of DuPont into two companies. One of the companies would comprise the Agriculture, Nutrition & Health and (likely) Industrial BioSciences segments ('14E Sales: $16.2B, '14E EBITDA: $3.7B) and the other comprising Electronic & Communications, Performance Materials and Safety & Protection segments ('14E Sales: $12.6B, '14E EBITDA: $3.0B). At that time, Trian believed a break-up of DuPont could result in a doubling of DuPont shares in 3 years. With the recent filing of a Form 10 registration statement for its Performance Chemicals spin-off, DuPont remains on track to complete the separation of Performance Chemicals (TiO2, Fluoroproducts, Chemical Solutions; '14E Sales: $6.7B, '14E EBITDA: $1.0B) by mid-year.
We believe the upcoming proxy fight between Trian and DuPont will be a referendum on i) DuPont's performance under CEO Ellen Kullman (who has been CEO since 2009) and ii) whether DuPont, ex Performance Chemicals, should be separated into two companies.
With the upcoming proxy contest likely to further highlight the intrinsic value of DuPont's portfolio, and our SOTP analysis yielding a value of $85 (before any SOTP discount), we reiterate our Buy rating.
Shares of DuPont have dropped 1.5% to $73.42 at 12:57.
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