The largest shareholder of US chemicals giant DuPont (Wilmington, Delaware; www.dupont.com) is urging the company to break itself up. In an open letter sent to DuPont’s board, Nelson Peltz, head of the Trian Partners (New York / USA; www.trianpartners.com) hedge fund asserts that “DuPont’s conglomerate structure is destroying value”, adding that after having worked quietly with the company for the past year to address some of the alleged flaws, “we can no longer be silent as DuPont continues to struggle to execute what we are convinced is a flawed business plan.”

Trian, which owns about 3% of DuPont shares – worth USD 1.6 bn – argues that aside from the proposed divestiture of its Performance Chemicals business (see Plasteurope.com of 01.11.2013), the group split into two autonomous businesses: “GrowthCo” and “CyclicalCo/CashCo”. While the former should consist of DuPont’s agriculture, nutrition, health and industrial biosciences businesses, the latter is to incorporate performance materials, safety and protection as well as electronics and communications. Adopting these measures, Trian said, “could double the value of DuPont’s shares over the next three years”.

In its letter, the hedge fund criticises DuPont for excessive holding company costs, disparate businesses and overwhelming complexity, bureaucracy and a lack of accountability, an inefficient capital structure as well as a persistent conglomerate discount. DuPont responded to Trian’s accusation that the company in June this year “lowered and/or missed earnings guidance for the third consecutive year” by saying that, “Our board of directors and management team have taken firm action over several years that has delivered 220% total shareholder return since year-end 2008.” The company added that while it does not comment on its discussions with shareholders, “we have had a constructive dialogue with Trian.”

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Trian’s letter to DuPont Board as a PDF file