UPDATE: Peltz takes DuPont fight to shareholders

UPDATED: Billionaire investor Nelson Peltz's Trian Group is pressing his campaign to squeeze more cash out of the DuPont Co. this morning with a formal proposal that makes good Peltz's threat to run himself and three allies against incumbents on Chairman Ellen Kullman's DuPont board. Read a summary of Trian's proposal here. Read the Trian "white paper" on Dupont here at www.DuPontCanBeGreat.com

After praising DuPont Co.'s nomination last week of turnaround specialists Edward Breen and James Gallogly to DuPont's board at the company's as-yet unscheduled annual meeting this Spring, and also praising DuPont's promise to give shareholders $4 billion from its pending Chemours spin-off -- a move that has upset DuPont's bondholders and led to a threatened credit downgrade by Standard & Poor's -- Peltz is making clear these steps aren't enough to end his campaign to push DuPont to cut costs, boost sales and profit margins, buy back shares faster to prop up the share price, and extract more cash for himself and other shareholders.

In the "white paper" laying out Peltz's latest vision of what DuPont ought to do, Peltz backed a little ways off a previous demand the company split in two; while Trian still supports a break-up in general, the firm wrote that its candidates for the DuPont board are "open-minded" as to the best corporate structure.

Both Peltz and Kullman have claimed credit for DuPont's share price rise since Peltz two years ago first sent his son-in-law, Edward P. Garden, to talk to her "regarding initiatives we believed would create shareholder value." Kullman says investors have shown confidence in her moves to sell old chemical businesses and buy new biology-based lines, to buy back up to $5 billion in DuPont shares in a bid to prop up the share price, and to cut hundreds of millions in costs.

Peltz says DuPont has routinely and consistently disappointed investors and posted weak returns, before and during Kullman's regime; he says the share-price run-up is more likely a result of his own attempt to force the company to do a better job for shareholders; and that billions in additional cuts are needed if the company is to grow its potentially profitable business lines and reward investors.

According to Trian, Dupont's multi-billion-dollar investments in pesticides, seeds and other agricultural research and development over the past five years has found no significant biotech traits for commercial exploitation. The company's disastrous introduction of the pesticide Imprelis (which I reported was affecting evergreens at DuPont's own country club in 2011), has forced charges of $1.2 billion, against sales of just $7 million. The company also was forced by a jury verdict to a $1.75 billion royalty settlement to rival Monsanto for having "willfilly infringed" on Monstanto's pestidice RoundUp ready 2.

According to today's statement filed with the SEC, when Kullman and her financial advisers took too long to answer his initial demands, Peltz began approaching individual directors, who brushed him off. DuPont later agreed to accept a single Peltz-backed director, but not Peltz himself. Peltz said that wasn't enough.

Peltz's success depends on Kullman's tolerance for what the company has termed Peltz's campaign "to disrupt our company at a key stage," and on Peltz's ability to sway other big investors to his side.

Peltz's firm says it has built its holdings to 24.6 million shares of DuPont, worth more than $2 billion at recent prices, and adds that he has coordinated his DuPont strategy with a Trian client, the California teachers' pension fund (CalSTRS), which holds another 1.7 mllion shares. Trian also noted it is a major shareholder in Legg Mason (owner of Philadelphia-based Brandywine Global Asset Management), which owns 5.4 million DuPont shares. Together Trian, CalSTRS and Legg Mason own about 3.4% of DuPont.

Peltz's  three running mates for the DuPont board are ex-GE Asset Management CEO John H. Myers, ex-H.J. Heinz CFO Arthur B. Winkeblack, and Robert J. Zatta, acting CEO at chemical maker Rockwood Holdings Inc.