Dow Chemical Says Loeb’s Breakup Plan Would Hurt Value

Dow Chemical Co., facing pressure from Dan Loeb’s Third Point LLC to split itself in two, said an internal strategic review concluded that such a move would reduce the value of the largest U.S. chemical company.

The review by the board, management team and external advisers found that creating separate petrochemical and specialty-chemical businesses would negatively affect Dow’s “value proposition,” the Midland, Michigan-based company said yesterday in a regulatory filing. A breakup also wouldn’t improve productivity or capital allocation, Dow said.

Third Point, an activist investor founded by Loeb, said in a Jan. 21 letter that Dow is its top holding and could add billions of dollars to earnings by spinning off commodity chemicals and plastics. Dow Chairman and Chief Executive Officer Andrew Liveris defended his strategy of integrating commodity chemicals with specialty products during a Jan. 29 conference call.

“Dow believes that specific actions it has taken to transform Dow from a commodity-based model into a vertically integrated science company focused on specialty materials, agriculture and specialty plastics is the right strategy to maximize value for all of our shareholders in the short and long term,” the company said in the filing yesterday.

‘Undistinguished’ Record

Third Point is ready to sign a non-disclosure agreement so it can review Dow’s analysis, noting that the company didn’t disclose its methodology or identify its advisers, the hedge fund said in a statement today.

“Dow has asked shareholders to accept its word,” Third Point said in the statement. “Transparency is essential considering Dow’s undistinguished track record of capital allocation decisions.”

The hedge fund wants a “constructive dialogue” among Liveris, Dow’s board and Third Point’s financial advisers to boost value for all shareholders. Third Point didn’t disclose its own advisers.

Louise Adhikari, a Dow spokeswoman, declined to identify the company’s advisers or disclose the methodology of its analysis.

Dow Chemical fell 1 percent to $46.37 at the close. The shares have climbed 42 percent in the past 12 months.

(Updates with Dow comment in penultimate paragraph.)
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