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Bank Of America Downgrades Du Pont Amid Trian Engagement

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Bank Of America Downgrades Du Pont Amid Trian Engagement
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E I Du Pont De Nemours And Co (NYSE: DD) got a double downgrade Monday on the same day an activist shareholder fired another shot across the company's bow.

DuPont changed hands recently at $78.70, down 2.2 percent.

Bank of America's Kevin W. McCarthy brought down DuPont by two notches to Underperform, citing troubles in both its agricultural and chemicals segments, as well as currency headwinds.

"The biggest risk to our more cautious posture is the ongoing engagement of activist investor Trian," said McCarthy, who maintained a $75 target.

In a letter Monday to DuPont's board, Trian's Nelson Peltz reiterated that Trian is "open to discussing a realistic settlement" to its proxy challenge.

Peltz called it "unfortunate" that DuPont hasn't offered an acceptable settlement and is engaging in a " a time-consuming, disruptive, and costly campaign against Trian."

McCarthy said he has "no particular conviction" that Trian would prevail in a proxy vote.

A settlement or compromise with Trian is "perhaps more likely" as a final outcome than a proxy vote, McCarthy said.

Trian last week offered to trim back its proxy contest by suggesting the placement of two instead four of its nominees on DuPont's board, plus two additional seats at Chemours, the company's chemicals unit soon to get spun off.

DuPont has reportedly offered recently to place one Trian nominee on its board.

McCarthy appeared lukewarm to Trian's larger proposal to further break up DuPont, noting that its advantages may be offset in some degree by the restructuring costs as well as the potential loss of cost synergies in a wholesale spinoff.

Meanwhile, margins at DuPont's chemicals segment are likely to narrow while its agriculture business will get squeezed by lower U.S. corn acreage this year and troubles in Ukraine.

Latest Ratings for DD

DateFirmActionFromTo
Oct 2016NomuraInitiates Coverage OnBuy
Oct 2016CitigroupUpgradesNeutralBuy
Aug 2016Deutsche BankMaintainsSell

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Posted-In: Bank of America Kevin W. McCarthyAnalyst Color Downgrades Analyst Ratings Best of Benzinga

 

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