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Trian stop me

9 January 2015 By Kevin Allison

Nelson Peltz’s latest proxy fight will resonate beyond its immediate target, DuPont. The billionaire activist’s Trian Partners is seeking four director seats at the venerable chemicals group, its first public battle since squeezing onto Heinz’s board nine years ago. Flexing muscle sends a message to other stubborn targets, like PepsiCo. It also gives Peltz’s potential successors experience in the trenches.

It’s been over three months since Peltz, 72, and his partners went public criticizing DuPont’s performance under Chief Executive Ellen Kullman, and eighteen months since the activist fund started holding private conversations with the company.

Trian wants DuPont to cut bureaucracy and invigorate performance by breaking itself up, a strategy Peltz has successfully pushed at other targets including Ingersoll Rand, Cadbury Schweppes and Kraft. DuPont says it’s happy with its strategy and that Trian’s criticism is misplaced, arguing its total shareholder return has bested that of both the S&P 500 Index and a gaggle of industrial and chemical companies since the end of 2008. But that hasn’t swayed Trian.

It’s a heady period for shareholder activism, yet while other uppity investors have waged successful proxy battles at the likes of Sotheby’s, Darden Restaurants and Cliffs Natural Resources, such a public fight is a departure for Trian.

Peltz and his founding partners, Peter May and Ed Garden, have a reputation as savvy operators and tend to be seen as a constructive presence in boardrooms, a goal they’ve managed to achieve in recent years through a combination of public prodding and private suasion.

It’s important to flex a little muscle once in a while, though. Proxy fights can be bruising affairs, and even experienced operators may run the risk of atrophy after a near-decade lull. Going to the mattresses also sends a signal to other Trian investments, like soft-drink maker Pepsi, that the firm’s patience is not infinite. It will also give younger members of Peltz’s team, including his son Matthew, who joined in 2008, useful experience on the front lines of a boardroom tussle.

Trian may be more focused on the potential financial benefits it sees from pushing its strategy though. But the longer-term fringe benefits of a successful proxy battle would be substantial.

 

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