Trian Partners Reiterates $120 Price Estimate On DuPont In New Presentation

Trian Partners' activist battle against E I Du Pont De Nemours And Co DD intensified this week after the investment firm published a new presentation, reiterating that its plan can unlock tremendous shareholder value with an implied target value per share in excess of $120 by the end of 2017.

Trian argued that DuPont's CEO, Ellen Kullman, appears to lack confidence in its share price, noting that Kullman has sold approximately 54 percent of her stock after Trian first invested in the company in 2014.

"Ask yourself: If the CEO and Board members truly believed in their strategy wouldn't they be buying stock?," the presentation stated.

'Disparate Businesses And Overwhelming Complexity'

Trian said that DuPont's Performance Materials, Safety and Protection and Electronics and Communications segments have historically been low growth and volatile and that margins have deteriorated despite the "significant" increase in ethylene spread profit from $204 million in 2007 to $538 million in 2014.

"DuPont remains a conglomerate with 44 percent of sales in low growth businesses," Trian argued.

The Other 56%: One Growth Business, Two Potentials

With 44 percent of sales coming from "low growth" businesses, Trian stated that the company's Agriculture segment (40 percent of sales) is a "proven" growth business while Nutrition & Health (12 percent of sales) along with Industrial Biosciences (4 percent of sales) are both unproven businesses but has the potential for growth.

An End To ‘Crony' Compensation'

Finally, Trian pledged to make changes to DuPont's compensation practices that "rewarded management for failing to meet its targets." In 2013, short-term compensation payout was almost 90 percent despite adjusted earnings per share growth of 3 percent, significantly below the company's long-term target of 12 percent earnings per share growth.

In 2014, management received a zero percent payout factor for "corporate performance" under the company's short-term incentive program. However, the Human Resources and Compensation Committee still found a way to pay management by giving an 80 percent to 100 percent payout factor for "individual performance."

"Does this make sense? How can it be that the Company is doing poorly operationally but management as individuals are each doing great?"