By David Benoit And Joann S. Lublin
Dow Chemical Co. said Friday that it would add two directors
proposed by Daniel Loeb to its board, quieting the vocal activist
investor who recently renewed his attack on the chemical giant.
The settlement, which also adds two new directors favored by
Dow, puts to rest the possibility of a long, potentially
distracting fight a week after Mr. Loeb's Third Point LLC ratcheted
up the pressure by going public with its demand for board
seats.
Dow's deal with Third Point is the latest example of a major
U.S. company reaching an accord with an activist investor to avoid
a public battle. The 117-year-old chemical giant, which has a
market capitalization of about $60 billion, was facing criticism
from Mr. Loeb over its performance since the financial crisis.
The Midland, Mich., company's shares, up 30% over the past 12
months through Thursday, rose 2.5% to $52.78 Friday.
Dow will add to the board Raymond Milchovich and Robert S.
"Steve" Miller, Third Point's suggested independent nominees, along
with two independent nominees that Dow had previously offered to
Third Point as compromise candidates: Richard Davis and Mark
Loughridge.
A Dow spokesman stressed that all four will be independent
directors and will work collaboratively.
"In any public company, directors have responsibility for making
decisions about the future of the company on the basis of a
collective majority, and that is how our Board will continue to
function going forward," the spokesman said in a statement
Friday.
Third Point also agreed to a one-year standstill agreement,
meaning the firm won't publicly criticize Dow during that time. The
hedge fund pulled down a website it launched last week that
included a political-style attack video ad.
The agreement was completed late Thursday after several talks
between Mr. Loeb and Dow CEO Andrew Liveris over the past week,
according to people familiar with the matter. The pact came only
hours after William Ruprecht, the longtime CEO of Sotheby's,
announced he was stepping down from the famed auction house less
than a year after Mr. Loeb joined its board.
Third Point's nominees pledged to bring a new perspective to Dow
Chemical, which has taken steps to restructure businesses and shed
assets and plans to return more capital to shareholders.
"Fresh eyes can take a new look at the capital allocations and
at the business segments that Dow should focus on," Mr. Miller said
in an interview Friday.
In a separate interview, Mr. Milchovich said there is
"tremendous opportunity for performance improvement" at Dow.
"I like change," he said. "There will be a full dose of that
here."
Messrs. Milchovich and Miller specialize in turning around
companies facing operational or financial difficulties.
Mr. Miller was most recently chief executive of Hawker
Beechcraft Inc. and is chairman of American International Group
Inc. Mr. Milchovich is a former CEO of Foster Wheeler AG and now
serves as the lead independent director of Nucor Corp.
Dow's two nominees have significant financial experience. Mr.
Davis is the chairman and CEO of U.S. Bancorp, and Mr. Loughridge
is a former chief financial officer of International Business
Machines Corp.
Mr. Davis has cultivated a reputation as an advocate of the
banking industry when some of his peers are more interested in
flying under the radar.
At a conference Thursday, Mr. Davis urged other industry
executives to "stand up and own" their profession. "For God's sake,
we're bankers, this is a great vocation," he said.
Dow had taken issue with Third Point's controversial plan to pay
its nominees bonuses based on the performance of the chemical
company's stock in three and five years, people familiar with the
matter had said. The pay structure has been criticized by some
corporate advisers as creating unequal board incentives.
Third Point's two nominees will keep the compensation package,
Mr. Miller confirmed Friday. The move is likely to embolden other
activists to try to offer such compensation packages in the
future.
"I have a significant incentive to create long-term shareholder
value over a three- to five-year period," Mr. Miller said. "But
that indeed should be the primary objective of every director."
Write to David Benoit at david.benoit@wsj.com and Joann S.
Lublin at joann.lublin@wsj.com
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