Coverage: Dupont CEO makes unexpected exit

Dupont’s longtime veteran CEO Ellen Kullman is leaving the company on Oct. 16. The announcement comes just five months after she won a very public proxy battle against activist investor Nelson Peltz and his Trian Fund Managment LP for board seats. Kullman has been with Dupont for 27 years.

Jacob Bunge of The Wall Street Journal had the day’s unexpected news:

DuPont Co. Chief Executive Ellen Kullman will retire next week, a surprise end to the tenure of an executive who fended off—at least temporarily—one of the most prominent in a wave of activist investor assaults on corporate boards.

DuPont gave no reason for the suddenness of the departure, which takes effect on Oct. 16. Ms. Kullman, who is 59 years old and has led the company since 2009, took on billionaire shareholder Nelson Peltz and his Trian Fund Management LP, which sought board seats and criticized the company—and its leadership—for bloated corporate spending and sagging profits.

Monday’s disclosure came as DuPont lowered its earnings outlook for this year—the latest in a series of such moves in recent years. Those disappointments were a main target of Trian in its attempt this year to gain seats on the Wilmington, Del., company’s board.

Michael J. de la Merced of The New York Times explained the outgoing CEO’s public battle with activist investor, Nelson Peltz:

Ms. Kullman will be replaced on an interim basis by Edward D. Breen, who is also 59, a former executive at Tyco, who joined the chemical manufacturer’s board in February under pressure from the activist investor Nelson Peltz.

Mr. Peltz and his investment firm, Trian Fund Management, fought a rare public battle against DuPont, the 213-year-old chemical manufacturer and maker of Kevlar and Teflon. Trian, insisting that DuPont needed change because it had repeatedly missed financial targets and still carried plenty of costs worth cutting, sought four board seats.

Many corporate boards in recent years have sought to settle with activists, aware of such investors’ growing appeal with mutual funds and other shareholders. These hedge fund managers have gained ever more success — and ambition: Trian itself disclosed on Monday that it had become one of the biggest shareholders in General Electric, and urged the industrial conglomerate to buy back more shares and take on more debt.

But Ms. Kullman took the unusual step of digging in and fighting against one of Wall Street’s best-known corporate dissidents, who has often gained board seats and prompted change without picking a public fight.

After several months of bitter public arguments and spurned settlement offers, DuPont ultimately prevailed in a shareholder vote on its board. But even those close to the company conceded that the investor base included a larger-than-normal group of individual investors, who largely back management teams.

Jack Kaskey and Carol Hymowitz of Bloomberg described Kullman’s retirement package:

The shares rose 5.3 percent to $54.02 at 7:10 a.m. in New York Tuesday before the start of regular trading. The stock has slumped 28 percent since May 12, the day before investors rejected Trian’s slate of directors, through Monday’s close.

DuPont now sees operating earnings per share for the full year at $2.75, down from $3.10 forecast previously. The average estimate of eight analysts in a Bloomberg survey was $3.04. The company said the revision primarily reflects the effects of a stronger dollar against emerging-market currencies, especially the Brazilian real, and the further weakening of agricultural markets, again primarily in Brazil.

Kullman’s retirement package was valued at about $48 million as of DuPont’s most recent fiscal year end. She had accumulated pension benefits of $17 million and deferred compensation of $5.75 million as of Dec. 31, 2014, according to a March proxy filing. She also had $25 million in outstanding stock and option awards, which would continue to vest on schedule after she retires, the filing shows.

Robert Wright of The Financial Times laid out of the company’s cut in its profit forecast and acceleration of its cost-cutting plans:

DuPont has faced sustained criticism over its record from Nelson Peltz, the activist investor behind the Trian Group, although his attempt to secure board seats failed in May. The company spun off its commodity chemicals business — now known as Chemours — in July to focus on its more profitable, less cyclical speciality chemicals business but its shares fell 33 per cent in the first nine months of this year.

The company warned on Monday it expected full-year earnings per share of $2.75, instead of the previously announced $3.10.

The change partly reflects an increase from 60 cents to 72 cents in the expected impact of a weakening US dollar. DuPont also blamed softer demand for seeds and pesticides, especially in Brazil, as a result of weakening economies, increased competition and a comparative dearth of insects to eat farmers’ crops.

“The company is experiencing reduced demand for crop protection products, reflecting low insect pressure and lower seed volumes as growers are expected to reduce hybrid corn planted area,” its statement said.

The company brought forward by a year its plans to cut costs, saying it expected to have taken $1.3bn out of its recurring annual costs by the end of this year and intended to increase that figure to $1.6bn by the end of 2017.