Dow Chemical said on Tuesday that it saw no value in pursuing a significant breakup, dealing a setback to a hedge fund manager who encouraged the company to split its petrochemicals and specialty chemicals businesses.
The hedge fund manager, Daniel S. Loeb, said last month that his firm had taken a large stake in Dow, and he urged the company to hire outside advisers and consider a breakup. If Dow spun off its petrochemicals business, Mr. Loeb said, that would create “the specialty chemicals leader that Dow has aspired to become over much of the past decade.â€
Dow was already trying to streamlin its operations, and its chief executive, Andrew N. Liveris, appeared to rebuff Mr. Loeb’s proposal on a conference call later in January. “We’ve actually done the divestment of what might be called the traditional petchem business,†he said, without identifying Mr. Loeb by name.
On Tuesday, the company provided an official response to Mr. Loeb’s idea (although, again, it did not mention Mr. Loeb or his firm, Third Point, by name).
A recent review “found that a breakup of the company in a significant manner (simplistically described as petrochemical and specialty chemical assets) created no productivity or capital allocation improvements, but rather negatively impacted Dow’s value proposition which leverages scale, integration costs and technology benefits across multiple science-based, vertically integrated value chains,†Dow said in a regulatory filing on Tuesday.
“Dow believes that the specific actions it has taken to transition Dow from a commodity-based model into a vertically integrated science company focused on specialty materials, agriculture and specialty plastics is the right strategy to maximize value for all of our shareholders in the short and long term,†the company said.
The statement was filed as an addendum to Dow’s quarterly and full-year earnings report. A representative of Mr. Loeb did not immediately respond to a request for comment.
