Management | Shareholder Activism

A battle is heating up ahead of the DuPont’s annual shareholders meeting, planned for April. On one side is the management team of the Delaware-based, 200-year-old conglomerate—satisfied with the company’s performance and counting on a solid base of traditionally passive investors. On the other side is Trian Fund Management, the activist asset management firm that in January appointed four members, including the firm’s chief executive officer and cofounder, billionaire Nelson Peltz, to DuPont’s board.

Top management at the venerable chemical group defended its current structure, saying that over the past one-, three- and five-year periods, DuPont had outperformed the market with total shareholder returns of 17%, 78% and 160%, respectively, all in excess of the S&P 500.

No matter how well DuPont has done, Trian execs believe it could do better if freed of what they consider excessive bureaucracy. “DuPont is struggling operationally,” said Trian in its January statement, issued three months after it had started to publicly criticize DuPont’s current structure. A less complex, leaner group could reduce the costs and boost market value, said the activist fund, suggesting to split DuPont in two—a unit focused on agriculture, nutrition and health, and another focused on industrial materials.

DuPont has a market capitalization of around $67 billion, a value that in the past would have shielded it from activist investors’ pressure. In January, Trian qualified as one of the largest owners of DuPont, with some 24.4 million shares valued at around $1.8 billion.

While the two sides are flexing their muscles, the message to other public companies is resonating beyond Trian and DuPont, amid a clear resurgence, in the past few years, of activism in Europe and the US: Beating your peers and the stock market may not be enough.