Time for a Cage Match

Apologies to the fans fan of this blog (Hi Mom!) for not posting in such a long time. Between Thanksgiving and winding up the school term, it's been pretty haywire. But the final exam has been written, (not proctored - that comes Wednesday) and then it's just a matter of final grades, although I am taking advantage of the break to start working on lecture notes for next semester.

But I have a great welcome back item - the announced merger of Dow and DuPont. Both of these companies have a lot in common. They are both huge. Their names both start with the letter "D". And they both have had to put up with activist investors in the last year or two.

Dow was the first to be attacked from "within", in this case by Daniel Loeb (1, 2, 3, 4, 5 and 6). That all ended when Dow and Loeb and declared a truce just over a year-ago. In a classic case of monkey-see, monkey-do (a phrase that in this case insults monkeys, even really dumb monkeys), Dupont was then attacked from within by Nelson Peltz (1, 2, 3 and 4) before finally losing his proxy battle.

But both of these guys are still hanging around the picture, which then raises the biggest question in my mind about the merger: which activist investor will be the top dog afterwards? Everyone is far more concerned concerned about government approval for the deal, but what about the undercard: Loeb vs. Peltz? As big as this new company will be, it still will not be big enough for these two mega-egos. One of them will have to go.

My proposal: a cage match!

Which company had the better activist investor? This would be the once-in-a-lifetime chance to find out. Imagine the pay-per-view revenue. Wall Street bankers, financiers and countless C-Executives (especially ones previously harassed by these two) would pay thousands to watch this. Mayweather vs. Pacquiaou pulled in $410 millions - this could double that and give me enough cash that I could become an activist investor! The bookies would have Loeb as the early favorite as he is a sprite 53 years (turning 54 later this week) while Peltz is almost 20 years his senior, but when big money like this is at stake, these guys would be as ferocious as 2 emaciated tigers fighting over a fattened lamb.

"Grace, get me Loeb on the phone right away. Oh, and start dialing up that Peltz guy too. We're going to do lunch..."

Previous Years

December 14, 2012 - Changes. Big Changes.

December 14, 2011 - Isolating Thixotropy from Shear Thinning

December 14, 2010 - Will the Supreme Court become Probabilistic?

December 14, 2010 - Epoxy Resin Drop as Art - and Rheology Puzzler

December 14, 2009 - LyondellBasell to go East?

December 14, 2009 - Thermal Hystersis

DuPont's CEO Wins the Proxy Battle, But is Leaving the Company

In much the same way that great revolutionaries seldom make great post-revolution leaders, CEO's are usually incapable of leading a company through more than one set of issues. Great turnaround artists don't work well for maintaining steady, long-term growth. The same goes for great acquistionaries, great sales-increasers, etc. The most recent example of that is Ellen Kullman, whom PlasticsNews is reporting to be leaving the CEO position of DuPont, having spent much of the year fighting of a stupid proxy fight, (probably the stupidest one I've ever seen). While she won the battle quite handily, she doesn't seem able to handle the new challenge.

Earnings for the chemical giant have been lowered for the coming year in large part due to the stronger dollar. This is an issue that CEO's from all international companies have to deal with. Those with a financial background can better handle these types of issues. Being an engineer by training, this is something that is probably out of her league (heaven knows I would be just as unqualified.) Whether the board asked her to step down or she initiated it is unclear and may never truthfully be known. But we can be certain of this: plenty of ink will be wasted on contradictory articles supported by anonymous sources as each side attempts to spin, counterspin and outspin the other. (Just don't expect me to cover it.)

Previous Years

October 6, 2010 - A Rare Case where a Misnomer Might be Good Thing

October 6, 2010 - Sun Chips to Pull It's Noisy PLA Bag

October 6, 2009 - The Dog and Pony Show

Trian vs. DuPont - Round 3

Nelson Peltz and his Trian Partners Group is still dogging DuPont. Having lost the last round (when DuPont explicitly told him that no, he cannot be on the board of directors and that DuPont was going instead add 2 more of directors of their own choosing), Peltz is still hoping a proxy fight will get him the directorship he so craves. And just like what Daniel Loeb did when he was attacking Dow, Peltz now has his own website, dupontcanbegreat.com [*]. His nominees for 3 other director chairs are rather scary, all being financial guys. (It takes more than fancy financial manipulations to effectively manage a company. See Google, Apple, Amazon, IBM and 3M for counterexamples. See Enron, Bears Stearn and Bernie Madoff for examples of how financial numbers that look great can end up being a complete fraud.) But even more so, I wonder about Peltz himself.

His only experience in running a chemical-type company was Avery from 1984 until 1992 and the results weren't too impressive. In early January of 1984, Avery stock was around $6.50 while at the end of 1992, it was around $13.88. While a 214% gain seems impressive, the S & P 500 rose 260% during that same time frame. Meaning he couldn't even keep pace with the general market. I think Peltz would call that underperformance, but he still thinks he has great advice on how to run DuPont.

Again, I don't follow DuPont's business performance too closely and maybe they do deserve to improve, but I really am bothered by this activist investor approach. If you own stock in a company that is stinking up the joint, then you may try and hype it up some in order to get the price to rise. But the activist investors aren't hyping up DuPont. They are trashing it in about every way possible. All of which raises this question:

"If the company is really that badly off, then why would anyone ever buy up such a large share of it?"

[*] Dupontcanbegreat.com? Couldn't someone have spent more than a few seconds coming up with that grade-school level name? And these guys think they have great advice on how to run the company?

Previous Years

February 17, 2012 - Reusing Old CD's - but for Artists Only

February 17, 2011 - A Single Phase Gel from Buckyballs?

February 17, 2010 - Potpurri

February 17, 2010 - Twitter