Just when it looked like clear sailing for the mega-merger of Dow Chemical Co. and DuPont Co., investor Third Point LLC has come up with a new plan for that transaction.
On May 24, New York-based Third Point, which is led by well-known investor Daniel Loeb, released a plan that would change the ultimate location of some businesses that include plastics after the merger, which is set to close in August.
The current plan calls for the combined DowDuPont to be split into three separate public companies, including one focused on materials, within 18 months after the merger becomes official. The Third Point plan suggests that Dow's silicones business — formerly part of Dow Corning — and DuPont's Tyvek HomeWrap polyolefin film business instead be placed in the specialty products spinoff.
The proposal recommends doing the same with most of DuPont's Performance Materials unit — except for ethylene copolymers and an ethylene cracker in Orange, Texas. The remainder of DuPont's Performance Materials unit — including nylon, acetal, PBT and other specialty plastics — would remain with the materials spinoff, according to the Third Point proposal.
The proposal refers to parts of the original plan as "erratic segmentation decisions" and claims that the newly proposed shareholder plan could create more than $20 billion in additional value.
"We believe this portfolio reshuffling will lead to a more appropriate fit between assets and will unlock significant value for shareholders," Third Point officials said in the proposal.
They also said that "smaller, focused carve-outs" such as Trinseo and Chemours "have significantly outperformed" after being spun off. Dow spinoff Trinseo's products include styrenic polymers and polycarbonate. The product mix at DuPont spinoff Chemours includes fluoropolymers and titanium dioxide.
In a May 26 email to Plastics News, a DuPont spokesman said that the boards of both Dow and DuPont earlier in May agreed to conduct a comprehensive review of the business composition of each division. "The two companies are fully aligned regarding the objective of the review," he said. "We continually solicit and welcome input from our shareholders."
This isn't the first time that Third Point has tangled with Midland, Mich.-based Dow. The two firms battled from late 2013 until late 2014, with Third Point accusing Dow of financial underperformance.
Dow and Wilmington, Del.-based DuPont posted combined sales of more than $72 billion in 2016. Both firms are major players in global plastics and chemicals markets.