Tuesday, October 14, 2014

Yet more activist investors thinking they can run a chemical business

I've been writing a fair amount this past year about Daniel Loeb and his efforts as an activist investor to tell Dow Chemical's CEO how to run his business (1, 2, 3, and 4).

Since Dow is doing so well (no doubt as a direct result of Loeb's guidance (/sarcasm_off), Loeb is looking for a new place to produce similar results, now setting his sights oversee on DSM. He wants DSM to sell off the low profit plastics business and focus exclusively on the baby food and nutrition supplements business which operates at much higher margins. In other words, he want to be able to cherry pick and be appreciated as a business genius for doing so. While it might be easier to divide up the DSM pie than the Dow Chemical pie (i.e., there is less overlap between different operating units within the company), to say that this will "create value" is something I don't see. (A + B) = A + B. This is a really simplistic example of the associative property, but we've seen in the past the Loeb isn't very good at math.

And lest you think that Loeb is the only one being a pain in the posterior for the chemical industry, think again. C & E News reported a few weeks ago that Dupont has their own activist investor complaining to management. Such are the times we live in. If you have a stack of cash, you can get Wall Street to listen to you even if you are full of skatole-type compounds.

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