Barbarians in the Boardroom: Activist Investors and the Battle for Control of the World's Most Powerful Companies by Owen Walker

Author:Owen Walker [Walker, Owen]
Language: eng
Format: epub
ISBN: 9781292114019
Google: ditjDAAAQBAJ
Published: 2016-07-04T12:05:45+00:00

Alternative plan

Earlier that year, in the weeks before Trian’s investment was known, DuPont had announced that it was considering ‘strategic alternatives’ for its specialist chemicals unit. On 24 October 2013, Ellen Kullman revealed that the DuPont plan was to spin off the chemicals unit into a new publicly traded company, which would be owned by DuPont shareholders. The new company would be focused on making pigments – which turn paint, plastics and paper white – refrigerants and other chemicals, like non-stick coatings and Kevlar, a material used in armour. The chemicals unit had accounted for just under a third of DuPont’s $6.3 billion of operating earnings the year before. The spin-off would be complete by mid-2015, Kullman said.

The following day, on 25 October, Kullman called Ed Garden to tell him that the board had considered his proposal of splitting the company into four, but it had rejected it. They had also decided against accepting a Trian nominee onto the board. The plan to spin off the chemicals unit had allowed DuPont to provide an answer to those shareholders that wanted to see a more rigorous shake-up of the company, while also blunting Trian’s advances.

But Trian would not be put off so easily. A week later, Kullman received a phone call from one of DuPont’s biggest investors, the California State Teachers’ Retirement System (Calstrs). The second-largest US public pension fund was also a significant backer of Trian and was close to its management team. Calstrs had a strong incentive to make sure DuPont and Trian could reconcile their differences. Calstrs asked Kullman to meet once more with Trian to see if they could find some common ground.

This was not Calstrs’ first intervention. Before Trian’s investment in DuPont was public knowledge, two of the pension fund’s representatives – its head of corporate governance, Anne Sheehan, and Aeisha Mastagni, a corporate governance portfolio manager – had attended a meeting between Kullman and Trian that also included DuPont’s lead director, Sandy Cutler. Calstrs had had concerns about DuPont’s performance for a while and also suspected the board were not doing enough to hold Kullman and her management team accountable for it.

‘We wanted to be part of the meeting because we wanted to show our support for Trian,’ recalls Mastagni. ‘But we also wanted to hear first-hand from DuPont – and especially Sandy Cutler – what his views were on Trian’s proposal and thesis.’

Calstrs and Trian had developed a close relationship over the years, with the pension fund supporting Trian in its campaigns against Heinz and Ingersoll-Rand. In both campaigns Trian managed to get board representation and, at the latter, had pushed the company to restructure some of its businesses. These were ominous signs for DuPont.

After the nudge from Calstrs, a meeting was arranged at the Washington, DC, office of DuPont’s lawyers, Skadden Arps. On 10 December 2013, Kullman and Cutler met Trian’s Ed Garden. The two sides had not spoken since Kullman had told Garden that the board had rejected Trian’s proposal to split the company in four and refused its request for a board seat.

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