Once again we are seeing outside activist investors demanding restructuring and “efficiencies” to improve shareholder value. Creating mostly tradable spreadsheet profits without any real regard to the companies and their underlying personnel. Of course, we release that any merger will cost jobs as duplicative functions and non-productive operations are reduced or eliminated. The question is how fast will job loss occur and is it better to be among the first to leave, seek lateral transfers, or simply wait-it-out to the bitter end? A question that can only be answered by the affected (or should we say afflicted) individual and their particular circumstances.
Here we find four major activist investors (Third Point LLC, Trian Fund Management LP, Glenview Capital Management LLC, and Jana Partners LLC) attempting to persuade management that their vision for the company should supersede that of the Board of Directors and senior management. Think Gordon Gecko in Wall Street. Individually, these activists own a tiny part of the company, but it is huge when measured against other shareholders.
This deal has been cooking since 2015, so perhaps the cautionary tale is to track the major activist groups and see which companies are involved. The original plan called for the combined company to be disassociated into three separate companies with each having a more narrow focus: materials, agriculture, and specialty chemicals. One of the biggest points of contention is that the activist investors believe that the “Dow-Corning” assets should be deployed into a separate company and not the materials group.
We have seen the recent split up of RR Donnelly into three separate enterprises in a similar fashion. Unfortunately for the shareholders, share value plummeted, and dividends were significantly reduced. In fact, it appears that the result was to make the individual parts more attractive to potential purchasers who wanted to buy additional capacity or a foothold in their core businesses. Unfortunately it destroyed much of the company’s value and left one of the newly-created companies in Chapter-11 bankruptcy.
Read the business news; it is often a portent of the future.