Coverage: Shareholder activist Loeb strikes out at Dow Chemical

Even though the ink is still drying on its $130 billion mega merger, Dow Chemical is still fending off attacks from shareholder activist Daniel Loeb.

Over the weekend, Loeb wrote a letter to the company’s board in which he agreed with the deal and then criticized the company’s timing of the deal. Loeb went so far as to ask for the CEO Andrew Liveris’ resignation.

Randall Chase of The Associated Press explained the details behind the merger:

Dow Chemical and DuPont are merging to form a company valued at about $130 billion as they try to counter falling commodities prices and weakness in some key markets that have pressured their giant agriculture and chemicals businesses.

The two companies, whose research has brought the world products ranging from Ziploc bags and Saran wrap developed by Dow to DuPont’s Teflon coatings and Nylon and Kevlar fibers, will first form DowDuPont, then separate into three independent publicly traded companies focused on agriculture, material science and specialty products.

The proposed merger, announced Friday, would temporarily create the world’s second-largest chemical company, behind BASF. It comes as both Dow and DuPont Co. have seen recent declines in agricultural performance and been pressured by activist shareholders to control spending and shift away from commodities to faster-growing parts of their businesses.

“Overall, this transaction represents a tectonic shift in an industry that has been evolving over the last many years,” said Dow Chairman and CEO Andrew Liveris, calling the merger a seminal event for employees and customers of the two companies, which have a combined workforce of more than 110,000.

DuPont Chairman and CEO Edward Breen said the “industrial logic” behind the deal was compelling.

“When I look at DuPont and Dow, I see businesses that fit together like hand and glove,” Breen said.

DuPont shares slid 5.5 percent to $70.44. Dow Chemical closed down 2.8 percent at $53.37.

David Benoit of The Wall Street Journal wrote about Dow Chemical’s longtime shareholder activist Daniel Loeb’s objection to the pending merger:

Long-simmering hostility between Dow Chemical Co. and Daniel Loeb reached a boiling point over the weekend, with the shareholder activist calling for the removal of Chief Executive Andrew Liveris in the wake of the company’s agreement to merge with DuPont Co.

On Saturday, a day after Dow unveiled the tie-up, Mr. Loeb sent a private letter to the board raising questions about the deal’s timing. Mr. Loeb supports the merger, which would create an agriculture and chemical giant currently valued at more than $120 billion before breaking it up into three parts. Mr. Liveris is to be executive chairman of the combined company, while DuPont CEO Edward Breen is to maintain that title at the new group.

Mr. Loeb’s letter, reviewed by The Wall Street Journal, questions whether the deal was rushed to be completed before a so-called standstill agreement barring him from publicly speaking about Dow expired this weekend.

According to people familiar with the matter, Mr. Loeb believes unanswered questions about leadership, the board and the breakup signal the deal was rushed. He believes a second deal Dow announced Friday to take complete control of joint-venture Dow Corning raises similar questions, the people said.

Dow hit back hard. Directors, including one appointed to the board at the behest of Mr. Loeb’s Third Point LLC, defended the deal and Mr. Liveris in a series of interviews. They called the suggestion on timing “ridiculous” and “difficult to imagine.”

“Personally I think it’s almost laughable to say that anyone tried to engineer this date to the expiration of the standstill,” said Raymond Milchovich, one of the two directors Mr. Loeb had nominated a year ago. “There was never any rushing on the part of management or the boards of either company to skip steps along the way.”

Michael J. de la Merced of The New York Times delved into the long-standing hostility between Dow Chemical and Loeb:

The hedge fund manager Daniel S. Loeb stepped up criticism of Dow Chemical over the weekend, calling on the chemical maker to bar its chief executive, Andrew N. Liveris, from having any role in the company after its merger with DuPont, people briefed on the matter said Sunday.

In a letter to Dow’s board, Mr. Loeb, chief executive of Third Point, questioned the hastiness of the transaction and suggested that Mr. Liveris may have accepted a lower price for the company to retain a role there.

Dow and DuPont announced on Friday that Mr. Liveris would become the executive chairman of the merged chemical manufacturer, to be called DowDuPont.

Mr. Loeb has been a persistent thorn in Dow’s side for more than a year. Late last year, he publicly criticized the company and Mr. Liveris for failing to meet financial performance targets and questioned whether the company was being run efficiently.

The two sides settled, with Dow adding four new independent directors and Mr. Loeb agreeing to a so-called standstill, which prevented him from publicly criticizing the company. The standstill expired on Saturday.

The announcement that Daniel S. Loeb’s firm, Third Point, had bought into Dow Chemical sent its stock up over 6 percent.

A spokeswoman for Mr. Loeb declined to comment. A representative for Dow, Rachelle Schikorra, issued a statement from Dow board members saying they were “unanimously and fully supportive of the announced merger of equals with DuPont and intended separation” into three companies.