Hedge fund's Loeb may be targeting removal of Dow CEO

MIDLAND, Mich.—Dan Loeb, founder of hedge fund Third Point, is calling for the removal of Andrew Liveris, Dow Chemical Co. CEO, days after the company agreed to combine with DuPont Co. in the largest-ever chemicals merger, according to a person familiar with the matter.

Loeb supports the deal but, in a letter sent to Dow's board on Saturday, questioned the timing of its announcement on Friday, just two days before the expiration of a standstill agreement between Dow and the hedge fund, said the person, who asked not to be identified because the letter hasn't been published. Loeb is concerned the merger may have been rushed to beat the expiration of the accord, the person said. Loeb declined to comment on the letter.

Third Point holds a 2 percent stake in Dow and last year criticized its financial performance. Loeb had urged Liveris to separate Dow's plastics and petrochemicals operations from faster-growing businesses such as crop seeds.

In November 2014, soon after Third Point initiated a proxy contest, Dow agreed to turn over two board seats to nominees of the hedge fund. The two sides also agreed to the standstill arrangement, which barred either from publicly disparaging the other.

Dow and DuPont said their all-stock merger of equals will create a company, DowDuPont, valued at about $130 billion, a first step toward eventually creating three new businesses focused on agriculture, plastics and materials, and specialty-chemical products

Liveris, also chairman of Dow, is slated to become executive chairman of the merged company. DuPont Chairman and CEO Ed Breen will become CEO of the new company.D

Directors of Midland, Michigan-based Dow, including the two nominated last year by Third Point, “are unanimously and fully supportive of the announced merger," Dow said in an emailed statement. "We stand by both our and DuPont's boards' unanimous decisions to conduct this transaction."

Nine of Dow's 12 board members excluding Liveris issued individual statements supporting management and the merger, including Raymond Milchovich and Robert S. Miller, the Third Point nominees who became directors in January.

Loeb said in his letter, first reported by the Wall Street Journal, that naming Liveris chairman of DowDuPont is an insult to Dow investors and that the 61-year-old CEO shouldn't have a role following the merger.

Earlier this month, Loeb complained about Dow's shareholder returns and called for a search for a new CEO, the person said. He has also questioned whether investors are funding Liveris's personal spending, according to the person.

Liveris repaid $719,923 in 2011 after a fraud investigator found Dow had paid for family trips to the Super Bowl, World Cup and Masters Tournament, as well as an African safari. The fraud investigator made other allegations about the CEO's spending in a whistle-blower lawsuit filed after she was fired. Dow said in February it had “reached an amicable settlement” with the former employee.

Loeb, 53, concentrates on event-driven investing, or trading in stocks or bonds of companies going through mergers, spinoffs or other changes. He's gained notoriety on Wall Street for his sometimes sharply worded letters criticizing the performance and management of companies his hedge fund is invested in.

Other targets in recent years have included Sony Corp. and Yahoo! Inc., where Loeb forced the ouster of CEO Scott Thompson.

DuPont pressure

DuPont has also come under pressure from an activist investor in the past two years. Trian Fund Management has argued that the company should be broken up to save costs. The investment firm, co-founded by Nelson Peltz, fought and lost a proxy contest in May but continued to hold a stake in DuPont.

Merging Dow and DuPont, followed by the creation of three more narrowly focused companies that will be leaders in their respective areas, had initially appeared to give both Third Point and Trian much of what they had sought. Trian said Friday it participated in the merger talks and fully supports the deal, which is “a great outcome for all shareholders.”