DuPont Names Breen CEO, Removing Interim Tag--Update
November 09 2015 - 3:05PM
Dow Jones News
By Jacob Bunge And David Benoit
DuPont Co. named Edward Breen as its permanent chairman and
chief executive, appointing an outsider who investors expect will
bring major changes to the agriculture-and-chemicals
conglomerate.
The appointment also could signal a truce with activist investor
Trian Fund Management LP, whose top executives in a meeting last
month with DuPont's board conveyed support for Mr. Breen taking
over, according to people familiar with the matter.
Mr. Breen, a DuPont board member and former CEO of Tyco
International PLC who took over as DuPont's interim CEO last month
after Ellen Kullman's sudden retirement , is expected to forge
ahead with plans to reduce costs as DuPont contends with deep
challenges in its main markets--and potentially to pursue deals
that could transform the 213-year-old maker of Pioneer corn seeds
and Kevlar fibers.
"Clearly, there's major change on the horizon," said Thomas
Weary, chief investment officer at Lau Associates LLC, a suburban
Wilmington, Del.-based firm that oversees about $500 million on
behalf of investors, including members of the DuPont family.
Mr. Breen became a DuPont director in February as Ms. Kullman
defended against Trian's proxy fight to gain seats on DuPont's
board. Ms. Kullman during her tenure had started a series of cost
cuts and sold or spun off two DuPont divisions to focus on
higher-profit operations increasingly centered on food and
agriculture. But Trian had pushed the company to go farther,
including potentially splitting itself in two.
Last month's meeting was the first Trian has had with DuPont's
whole board since Trian started engaging with the company in June
2013, the people familiar with the matter said. At the meeting,
Trian Chief Executive Nelson Peltz and Chief Investment Officer Ed
Garden pressed Mr. Breen and DuPont's other directors to respond to
what Trian considers poor performance by the company, and outlined
several strategic options they believe would create more long-term
value, the people said.
Dennis Carey, a vice chairman at executive-recruiting firm
Korn/Ferry International, said Mr. Breen's appointment is an
opportunity for DuPont to reset relations with Trian, if not pursue
all of the investment firm's ideas. "He will befriend Nelson
[Peltz] in a way that's consistent with good corporate governance,"
said Mr. Carey, a longtime acquaintance of Mr. Breen.
Mr. Weary of Lau Associates said Mr. Breen's track record of
overhauling Tyco--he twice broke up its businesses through
spinoffs--and the potential for consolidation in the agriculture
industry boost the odds that DuPont will separate out its
seed-and-pesticide business, its biggest source of profit and
revenue. "This may be the end of DuPont as you know it," he
said.
Mr. Breen, through a DuPont spokesman, declined to comment.
"He's spending his time and attention right now on internal
meetings with teams focused on improving our business performance,
cost structure, and evaluating strategic opportunities," the
spokesman said. In the past, Mr. Breen has defended DuPont's
structure and stressed that Tyco required "extreme measures."
Last month, though, Mr. Breen said he was discussing possible
deals with executives at rival agriculture companies, many of which
are considering mergers amid a three-year decline in crop prices
that has pushed seed and pesticide prices down. DuPont is holding
early-stage discussions with Dow Chemical Co. and Syngenta AG, The
Wall Street Journal reported last week.
Mr. Breen, who also has been CEO of General Instrument Corp.,
had been widely seen as a contender to stay on as DuPont's leader.
But his selection marks the first time the top executive position
has gone to someone from outside DuPont, which traces its roots to
gunpowder mills built by founder Éleuthère Irénée du Pont de
Nemours near Wilmington. Previous DuPont CEOs either arose from the
founding family or were promoted from within, including Ms.
Kullman, who had decades of experience working across the company's
divisions.
Rusty Robinson, president of Robinson Investment Group, said he
expects Mr. Breen to consider splitting up DuPont's businesses to
improve their competitive footing across DuPont's various
industries. As part of that, "you could see lower profit margin
companies of DuPont spun off and sold to private equity or venture
capital companies," said Mr. Robinson, whose Brentwood, Tenn., firm
owns about 57,000 DuPont shares.
DuPont's stock climbed 0.5% in Monday trading to $66.44, against
a broad decline in U.S. stocks. The shares have risen about 30%
since Ms. Kullman announced her resignation in early October.
Mr. Breen remains chairman at Tyco, which on Monday declined to
discuss any potential plans to replace him. Mr. Breen is keeping
his board seat at Comcast Corp., where he is lead independent
director, a Comcast spokesman said.
Joann S. Lublin contributed to this article
Write to Jacob Bunge at jacob.bunge@wsj.com and David Benoit at
david.benoit@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 09, 2015 14:50 ET (19:50 GMT)
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