DuPont Retail Investors Prove Decisive in Defeat of Trian

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Peltz Rejection Outcome We’re Pleased With: Dupont CEO

DuPont Co.’s army of retail shareholders proved decisive in the defeat of veteran activist investor Nelson Peltz’s attempt to get on the board and split up the 212-year-old chemical company.

All DuPont’s director nominees were elected, it said Wednesday at its annual meeting in Wilmington, Delaware. Peltz’s Trian Fund Management, which had sought four board seats, said the vote was “close.” The final count hasn’t been disclosed. DuPont shares fell as much as 7.4 percent.

The outcome is a decisive victory for DuPont Chairman and Chief Executive Officer Ellen Kullman following a five-month proxy fight. Both sides tried to muster votes via advertisements in local and national media. About one-third of DuPont shareholders are private individuals such as retired former employees, compared with about 10 percent at most other companies, the company said last month.

“We got retail investors’ attention this time,” Kullman told reporters after Wednesday’s meeting was adjourned. While such shareholders rarely vote, when they do they’re usually supportive of incumbent management, she said.

The result represents the first activist campaign Trian has lost since Peltz co-founded the firm a decade ago. Peltz, 72, will “watch and wait” before deciding what to do next with Trian’s $1.7 billion stake in DuPont, he said in an interview with Bloomberg Television’s Betty Liu.

“Let the market speak,” he said. “We will see what happens.”

‘Scaring People’

The shares fell 6.8 percent to $69.77 at 1:07 p.m. in New York, heading for the biggest drop in more than two years. The decline is the result of short-term investors concerned about a possible slowdown in DuPont’s cost-cutting efforts now that Trian has been defeated, said Jim Sheehan, an analyst for Suntrust Robinson Humphrey Inc.

In contrast, retail investors aren’t that interested in seeing a dramatic improvement in operations or faster earnings growth, Sheehan said in an interview. They primarily own the stock for its steady dividend payment, he said.

DuPont “clearly did a better job with the retail shareholder who clearly doesn’t understand the issues,” Peltz told reporters in Wilmington immediately after the meeting. “They did a better job scaring people.”

Trian had support from some institutional investors but could have done better with retail shareholders and index funds, he said.

Trian Profit

Peltz said he doesn’t consider Wednesday’s result to be a failure, citing the gains in the share price since Trian became involved. The price of the stock is up more than 40 percent since the second quarter of 2013, the earliest period for which Trian disclosed an interest in DuPont.

Trian spent much of the past two years criticizing DuPont’s financial performance, arguing that the company was too complex and bureaucratic and would be better off split into two. Peltz continued in a similar vein on Wednesday, saying DuPont probably won’t meet its guidance this year.

Kullman, reflecting on the fight with Trian, told Bloomberg Television that the science-heavy company succeeded in part by learning how to better tell its story to investors.

“We pulled that together, we’ve engaged with our shareholders,” she said. “I’ve been encouraged with the responses I’ve gotten.”

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