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 DuPont's shares rose 4 percent in premarket trading.
Trian Fund, which holds a $1.6 billion stake in DuPont, wants the
company to split into two - one holding its fast-growing
agriculture, nutrition and health and industrial biosciences
divisions.
The other will hold its cyclical businesses such as performance
materials, safety and protection, electronics and communications.
DuPont is already hiving off its performance chemical business,
which makes materials used in non-stick cookware, refrigerants and a
white pigment used in toothpastes.
The company has also announced a $5 billion share repurchase
program. But Trian Fund said these steps were not enough.
"While we applaud the announced spin-off of Performance Chemicals,
the Fresh Start initiative and the $5 billion share buy back
authorization, we believe strongly that, by themselves, these moves
are not enough to optimize shareholder value," Trian Fund said in a
Sept. 16 letter to DuPont's board released on Wednesday.
Peltz, who first disclosed his stake last year and had been in
discussion with the company for more than a year, said in the letter
that he would begin to meet with other shareholders.
Peltz has been the force behind some large splits in the food
industry. He had a role in the breakup of Cadbury Schweppes into Dr
Pepper Snapple Group and Cadbury, and was involved in the subsequent
purchase of Cadbury by Kraft. He then played a role in breaking up
Kraft into Kraft Foods Group Inc and Mondelez International Inc.
Peltz's stake in DuPont would translate into 24.3 million shares
based on the stock's Tuesday close of $65.83, making Trian Fund the
sixth largest shareholder, according to Thomson Reuters data.
Peltz said his proposal would eliminate $2 billion to $4 billion in
annual costs and double the value of DuPont's shares over the next
three years, saying the company's conglomerate structure was
"destroying value".
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DuPont shares are trading at nearly 15 times its 12-month forward
earnings, lagging those of seed maker Monsanto Co, which is trading
at 19 times. The stock trades at a premium to chemicals maker BASF
Se, whose shares are trading at about 12 times earnings.
DuPont has justified keep its businesses together, citing pooled
research and development costs and benefits from cross-selling.
The company said late on Tuesday that it welcomed open
communications with shareholders, after the Wall Street Journal
reported on Trian Fund's letter.
DuPont's shares were trading at $68.50 before the bell. Up to
Tuesday's close, the shares had risen more than 10 percent in the
past 12 months.
(Reporting by Swetha Gopinath and Supriya Kurane in Bangalore;
Editing by Gopakumar Warrier and Sriraj Kalluvila)
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