DuPont: close play

In baseball, if the fielder's throw arrives at first base at the exact same moment as the batter's foot, the referee calls "safe". The tie, in other words, goes to the batter.

There is now just such a race to the base going on between DuPont's management and the investor Nelson Peltz. Differing visions for the future of the industrial stalwart will clash in May, when shareholders vote on Peltz and three of his nominees for spots on DuPont's board. Incumbents and dissidents are touting their records in the rare contest where a large, respected company becomes the field for a brutal fight.

DuPont has performed decently in recent years. Mr Peltz must argue that it should have done better still. Since current CEO Ellen Kullman took the helm in January 2009, DuPont shares have returned 250 per cent. But, as Mr Peltz points out, Ms Kullman took over at the bottom of the bear market - and Mr Peltz's agitation have pushed the shares upwards. Profits are not propelling the shares: DuPont's earnings per share have not deviated much from $4 in recent years.

Ms Kullman is engineering a well-received portfolio transformation. DuPont is exiting the cyclical chemicals and coatings businesses. What will be left is a company essentially split between highly specialised materials and agriculture/nutrition. The goal is to replicate the valuation of agricultural science leader Monsanto. Its shares trade at 20 times earnings.

At the same time, Ms Kullman has announced a $1bn cost-cutting plan, which seems to respond to Mr Peltz's accusation of flabbiness. He can fairly point to DuPont's 2013 divestiture of its coatings business. The buyer, Carlyle Group, recently listed that business, and it has shown a big improvement in profitability since it left Dupont's aegis.

The nastiness of the fight (Mr Peltz and DuPont have rival websites "DuPont Can Be Great" and "Dupont Delivers") belies the possibility of a simple compromise, where the company concedes a few board seats. The stock price performance and the plan already being executed cannot be dismissed easily. At the same time, Mr Peltz will not decrease the pressure on the board and management anytime soon, however the board is reshaped. It was a close play, but Mr Peltz has made it safely to first. First base is not home plate, however. He has not earned the right to impose his more radical ideas about increasing DuPont's debt to boost returns to shareholders, or pursuing further divestments. There are lots of innings left to play.

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