Did one of DuPont Co.’s newest directors have designs on the job of chief executive officer?
That’s what Nelson Peltz, the head of activist investor Trian Fund Management, told investors in New York on Tuesday.
Peltz, who’s waging a proxy battle with DuPont, said he ended an attempt to recruit James Gallogly as a board nominee because Gallogly insisted on running as a replacement for DuPont CEO Ellen Kullman. Peltz said his firm seeks to work with CEOs, not replace them. DuPont subsequently hired Gallogly Feb. 5 as an independent director.
“We asked him to have a conversation about being one of our nominees,” Peltz said at an event to introduce investors and reporters to Trian’s four board nominees. “He said he would only do that if we appointed him CEO-designee going in.”
Gallogly, a former CEO and chairman of chemical maker LyondellBasell Industries NV, said in an e-mail that Peltz’s account “is simply untrue.”
“I have chosen to work with Ellen Kullman and the rest of the DuPont board to build value for shareholders, and I am looking forward to a long and productive relationship,” he said.
The war of words between Peltz and Gallogly comes as Trian and DuPont seek support ahead of the chemical company’s May 13 shareholders meeting in Wilmington, Delaware. Trian says 212-year-old DuPont is laden with excessive corporate expenses and could be broken up. Kullman has defended her company’s conglomerate structure and says Trian’s proposal is high-cost and risky.
The breakup plan was one reason why Gallogly rejected Trian’s overture, he said in an April 9 letter to DuPont shareholders. Gallogly also said in the letter that he objected to how Trian takes an operational role on company boards.
Peltz, who’s also Trian’s CEO, said Tuesday that while he wants to be elected to the DuPont board to evaluate the corporate structure, he’s “agnostic” on whether splitting up the company is the only way to achieve Trian’s estimated savings of $2 billion to $4 billion a year.
“We think that a breakup is a good thing for the board to discuss, and a good thing for the board to discuss in great detail, but we’ll be only a minority on the board,” Peltz said.
He also denied that Trian would seek to cut research and development spending at DuPont.
Other Trian officers at the meeting defended their firm’s approach. Edward P. Garden, a Trian co-founder, told the meeting that the firm’s team of analysts helps prepare directors “to eliminate management’s information advantage.”
Trian nominee Art Winkleblack said he never viewed Trian as running a “shadow management” team when he was chief financial officer of Heinz Co., a previous target of the activist.
“We never worried they were trying to step into our shoes,” Winkleblack said.
Several hours earlier, DuPont reported first-quarter earnings. Profit excluding some items was $1.34 a share, which beat the $1.31 average of 17 analysts’ estimates in a Bloomberg survey.
Still, sales fell to $9.17 billion from $10.1 billion, missing the $9.39 billion average estimate. The company said 2015 profit will now be at the low end of its previous forecast of $4 to $4.20 a share, largely because of the stronger dollar. The shares closed 3 percent lower at $70.69.
Garden said DuPont must now increase earnings 30 percent over the remainder of the year to meet its forecast.
“I can save you the suspense,” Garden said. “It’s not going to happen.”