Good afternoon everyone,
It did not take long for corporate turmoil to return. As of today, DowDuPont spinoff Corteva may be headed to a boardroom battle.
The Wall Street Journal reported that an activist investor company known as Starboard wants to control the board of Dow and DuPont’s combined agribusiness operation. Starboard also issued a letter outlining its demands and nominees for board seats.
Starboard’s gambit is a head-scratcher at first glance. Shares of Corteva nearly doubled in price in the past year and in a good day for market the stock’s price fell by four percent.
In a move reminiscent of Nelson Peltz’s boardroom tactics that put DuPont on the path to a merger and split-up, Starboard wants to evict DuPont veteran James Collins from Corteva’s corner office.
You might remember Corteva was the rationale for the mind-numbingly complex financial engineering work that went into merging and then spinning off Dow and DuPont. Corteva was touted as the crown jewel that would emerge out of the deal-making.
The growth potential was also the justification for moving DuPont’s pension plan to Corteva.
We also know that some of the old DuPont liabilities were shifted over to Corteva, including a now-razed plant in Texas that was the scene of four deaths that came after the release of a deadly substance. Federal prosecutors in Texas recently secured indictments that named DuPont (Corteva) and a former manager.
Starboard, which acquired a 1.6 percent stake in Corteva, may have limited leverage, but based on past actions, could get a couple of its picks on the board.
Activist investors – sometimes known by the less flattering terms of corporate raiders or asset strippers – show up when stock prices are not meeting expectations.
We learned earlier that President Joe Biden does not have much use for these entities during the campaign based on his behind-the-scenes views on the Peltz-DuPont effort. Then again, the president has a lot on his plate and would be reluctant to chime in.
Others hold their noses and view activists as a necessary evil in forcing companies to improve their performance.
Starboard’s likely hope is that the agitation will boost the stock price. Starboard could also take a page from Peltz’s playbook and add to stock holdings in a bid to increase its leverage.
Any corporate upheaval would have only a modest initial local impact since Corteva has a relatively small corporate presence at its headquarters at Chestnut Run, just outside Wilmington.
The bulk of Corteva’s U.S. operations are located in the Midwest. A lucrative Corteva business that had an R&D presence at DuPont’s Stine-Haskell site was sold off to Philadelphia-based FMC for antitrust reasons.
The pension plan could be another story. Any tweaking would add to long-running concerns over changing the legacy system of monthly payments.
To sum up, we have seen this movie before, and the ending sucked – Doug Rainey, chief content officer.
