Nelson Peltz fails to win board seats at DuPont

Nelson Peltz has been defeated in his attempt to win a board seat at chemicals company DuPont, in the highest-profile battle with a hedge fund activist at this year's annual shareholder meetings in the US.

Trian Fund Management, the investment firm run by Mr Peltz, said on Wednesday that the four nominees it put up for election to DuPont's board had not secured enough backing from fellow shareholders.

DuPont scored its victory against a tide of increasingly successful hedge fund activism, showing the power of several corporate defence tactics: aggressively challenging activists' financial plans as short-termist, appointing shareholder-friendly directors of the board's own choosing, and warning that an activist's presence on the board would be disruptive.

Shareholders, meanwhile, seemed content that Trian's presence on the share register was enough to hold DuPont management to a high performance standard, without granting board seats.

The full details of the voting will not be released for up to four days, but Ellen Kullman, DuPont's chief executive, suggested the decisions had been close, saying they had gone "down to the buzzer".

DuPont had campaigned hard to win support from retail investors, who own about 30 per cent of the company. About half of those shares had been voted, and had overwhelmingly supported Ms Kullman and the board, according to a person with knowledge of the voting.

Mr Peltz himself, who was the Trian nominee with the greatest support from shareholder advisory services, came the closest to being elected, the person said.

Vanguard, BlackRock and State Street, the index fund managers, all voted against Trian's nominees.

"DuPont's board and management team have staked their reputations on executing the company's current strategy," Trian said in a statement after it became clear it had lost the vote.

"Our efforts have created appropriate pressure to prove this strategy can actually deliver high quality and consistent earnings growth."

Trian has sought to persuade DuPont investors that the company would be better placed splitting off some of its businesses with rosier growth prospects, while also lambasting the company's internal cost controls.

Even before Trian first took a position in its shares, DuPont had been working on plans for restructuring and cost-cutting, including the spin-off of its performance chemicals division. which makes titanium dioxide paint pigment and Teflon. That division is scheduled to be listed as a separate company, called Chemours, around the midpoint of this year.

Since Trian went public with its criticisms of DuPont's management, the company has stepped up its cost-cutting efforts, promising savings worth $1bn a year by the end of 2015, with more to come. It has also sold the theatre it owned in Wilmington, Delaware, and said it would consider offers for its hotel and country club.

DuPont has rejected the call for a bigger break-up of the company, accusing Trian of a lack of understanding of its industry. It is already spinning off its performance chemicals division, which makes paint pigments and Teflon.

The company confirmed, at the opening of its annual meeting in Wilmington, Delaware, that all 12 of its board directors had been re-elected.

Ms Kullman - who had earlier offered Trian one seat on the board, though not to Mr Peltz himself - said: "We are pleased with the outcome of the vote and especially appreciate the strong expressions of support from so many of our shareholders for our strategic transformation and the continued execution of our plan."

Trian scored public support for some or all of its nominees from the influential proxy voting advisers ISS and Glass Lewis and from a number of DuPont shareholders, including the California pension fund Calstrs.

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Fellow California fund Calpers, however, backed DuPont, saying that Trian's plans smacked of short-termism, entailing swingeing cuts to research and development and an increase in debt that would damage the company's credit rating.

The DuPont shareholder register is dominated by the largest asset management firms, which have dedicated teams assessing corporate performance and corporate governance.

DuPont used the law firm Skadden and the investment bank Evercore in planning its defence against Trian. It was also advised by Goldman Sachs and Innisfree.

In February, the company appointed two new independent directors, Tyco International chairman Edward Breen and James Gallogly, former chief executive of LyondellBasell Industries, who were elected on Wednesday.

Trian had proposed Mr Peltz, John Myers, a former chief executive of GE Asset Management, Arthur Winkleblack, a former Heinz executive, and Robert Zatta, who runs speciality chemicals group Rockwood Holdings.

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