UPDATED Feb. 6
A proxy fight is beginning to look like a strong possibility between DuPont Co. and an activist investor after the company rejected all four of the nominees Trian Fund Management LP put forward for its board of directors.
In a letter filed with the U.S. Securities and Exchange Commission, DuPont executives said they considered an independent candidate put forward by Trian, but that Trian's founding partner, Nelson Peltz, rejected any plan that did not put him on the board.
“Unfortunately you insisted — while refusing to hear the details of our proposal — that you will not consider any proposal that does not include you personally being added to the DuPont board,” stated the letter to Peltz signed by DuPont CEO Ellen J. Kullman and Alexander M. Cutler, a DuPont board member and CEO of Eaton Corp.
However, Peltz and Trian indicated in a response that a protracted fight likely is in the making, stating the investors “cannot be passive while management continues to falter.”
Wilmington, Del.-based DuPont announced Feb. 5 it has selected Edward Breen and James Gallogly as independent directors to the board effective immediately. Both men were involved with restoring existing businesses.
Breen currently is chairman of the board of Tyco International and was CEO of that company from 2002 to 2012, stepping in to transform the business after its near bankruptcy and collapse. Gallogly previously served as chairman of the management board and CEO of LyondellBasell Industries NV and guided that firm out of bankruptcy.
They are replacing Curtis Crawford and Richard Brown who are moving from DuPont to first serve as consultants to DuPont's pending spinoff business Chemours Co. Brown is slated to serve as non-executive chairman of Chemours. Chemours will be made up of DuPont's Peformance Chemicals unit, which includes the Teflon-brand fluoropolymer and titanium dioxide business.
In January, Trian nominated four people for DuPont's board, stating that the existing board “has not held management accountable for continuing underperformance and repeated failures to deliver publicly stated revenue and earnings targets.”
In addition to Trian CEO Peltz, the other nominees were:
• John Myers, a director of Legg Mason Inc.
• Arthur Winkelblack, a former H.J. Heinz Co. executive.
• Robert Zatta, a longtime executive with specialty chemicals maker Rockwood Holdings Inc.
“Following your public nomination of a slate of directors,” Kullman and Cutler wrote in the letter to Peltz, “the board carefully reviewed the qualifications of each of your proposed candidates and conducted interviews with all of them, including you. After careful consideration, the board concluded that our two candidates are the best possible choices to fill the vacancies created by our departing directors.
“However, the board also concluded that based on qualifications, there was one independent nominee on your slate that we would consider as a potential additional board member, provided you would agree to withdraw your slate and support DuPont's nominees.”
With Peltz's refusal to consider any proposal that did not place him on the board, according to DuPont, it moved ahead with its existing plan to add Breen and Gallogly.
The letter ended with the two executives stating they “remain open to dialogue” in the future.
While Trian, in its response, said its principals have spent time with Breen and Gallogly and respects their records of stockholder value creation, it hinted that it will continue to put forward its own slate.
“While DuPont frames Trian's insistence that Nelson Peltz be added to the board as a negative, we believe fellow stockholders want our nominees on the board, specifically Mr. Peltz, based on their strong track records of value creation, relevant operating expertise and new and different perspectives,” it said.
Trian owns about 3 percent of DuPont's stock, valued at $1.9 billion.