Feb 12 Dow Chemical Co's "lack of
transparency" makes it difficult to determine whether the
petrochemical giant should be split up or kept together, hedge
fund titan Daniel Loeb said on Wednesday.
The harsh words escalate the tension between the largest
U.S. chemical maker and Loeb, operator of the $14 billion Third
Point hedge fund.
Loeb, who last month said Dow Chemical had become the
largest equity investment held by Third Point and urged the
company to spin off its lucrative but slow-growing petrochemical
unit and focus on specialty materials, issued
the remarks a day after Dow Chemical said an internal review
found breaking up the company would not help shareholders.
By digging in its heels, Dow Chemical wants to show it
doesn't plan to give in easily to Loeb's demands the way that
Yahoo! Inc and other companies have in the past.
Loeb's foray against Dow Chemical marks the third time in
less than a year that he has demanded changes at a major global
company, including asking Sony to separate its
entertainment division and demanding that Sotheby's find
a new chief executive officer.
Dow Chemical's CEO, Andrew Liveris, dismissed the breakup
idea almost as soon as Loeb announced the idea to investors
while at last month's World Economic Forum in Davos,
Switzerland. Both Liveris and Loeb attended the forum, though
they reportedly did not meet.
The Midland, Michigan-based company, in a filing with the
U.S. Securities and Exchange Commission on Tuesday night,
disclosed the findings of the internal review.
The company said that a breakup could actually hurt
shareholders by hindering its ability to buy supplies in bulk
and share scientific research.
Dow Chemical's attempt to remake itself as a "vertically
integrated science company" remains "the right strategy to
maximize value for all of our shareholders in the short and long
term," executives said in the filing.
Third Point on Wednesday took umbrage, saying in a statement
to Reuters in response to questions about the filing that Dow
Chemical's "lack of transparency" makes it difficult to
determine how its decision was reached.
The hedge fund said it was prepared to sign a non-disclosure
agreement with Dow Chemical in order to review the company's
records and arrive at its own conclusion.
"Transparency is essential considering Dow's undistinguished
track record of capital allocation decisions," Third Point said.
Dow Chemical declined to comment, saying that it had nothing
to add beyond its regulatory filing.
Loeb has not disclosed the size of his stake in Dow
Chemical. Loeb had said in a letter to investors, which was seen
by Reuters, that Dow Chemical is now his largest investment.
That indicates the investment exceeds $1 billion, the amount he
paid for a stake in Japan's SoftBank Corp, announced
Shares of Dow Chemical fell 1 percent to close Wednesday at
Loeb's Third Point ranked as one of the hedge fund
industry's best performers last year. But Loeb started this year
on a down note with his fund off 1.8 percent.