In a move that seems to appease Dan Loeb's Third Point LLC DowDupont Inc. (DWDP) - Get Report is reportedly retooling their three-way break-up following the $150 billion merger the companies completed just a short while ago.
The company is shifting assets with about $8 billion in revenue and $2.4 billion in Ebitda from the materials spinoff, to the specialty chemicals unit, in a move that will allow the two separate companies to focus on different customers, according to a company statement. The Wall Street Journal first reported the potential changes, which primarily affect the Dow Corning division that Dow acquired in June 2016.
"We were pleased to be part of a dialogue that created such a positive outcome for all of DowDuPont's shareholders," Loeb's Third Point told The Deal. Loeb had been the most vocal activist shareholder, recently raising issues with the Dow Chemical Co. and Dupont merger.
DowDupont CEO Ed Breen is scheduled to speak along with activist Trian Fund Management LP co-founder Ed Garden at the Delivering Alpha conference in New York on Tuesday. Both Breen and Garden are likely to address the situation.
Third Point, as well as Jana Partners LLC, Glenview Capital Management LLC, and Trian, have all privately voiced concerns that management could impede efforts to retool the company. Trian was the investor which first pushed for the Dow Chemical Co. and DuPont merger.
"Our DowDuPont Board is fully aligned and confident that these targeted portfolio adjustments are the right actions to take and will benefit all stakeholders over the long term," said Andrew Liveris, executive chairman of DowDuPont, in a statement.
Loeb's Third Point has suggested in a presentation earlier this year that the company should evaluate whether "three spin-off companies is appropriate or if the creation of additional businesses or divestitures would further enhance shareholder value." The fund suggested that the specialty products business, post-closing, could be split into as many as four public companies to ensure that each unit has a "clear and compelling investment case."
Loeb also suggests that several businesses should be shifted from the material science unit to the specialty products company, post-closing. In other words, Loeb sought to have the combined companies shift divisions and break up into even more than three companies to drive share-price improvement value. The announcement on Monday appears to achieve some but not all of Loeb's initial demands.
The revised split being reported by the Journal allows the materials unit to better focus on packaging, infrastructure and consumer care companies and the specialty-chemical business to focus on electronics and imaging, transportation, construction, and nutrition. The agriculture business is unaffected under the new plan.
Dow and Dupont on Sept. 1, began trading as a combined entity under the name DowDupont Inc. and the ticker DWDP on the New York Stock Exchange. Shares of DowDupont are up 3% since the company began trading, ticking up about $1.46 per share, or 2%, Tuesday to $68.33 per share.
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