DuPont fight costs spiral

From Activist Insight Online

24 March 2015

Trian Fund Management has spent $1.5 million on its proxy fight with chemicals conglomerate DuPont, taking the current spend by both the activist and the issuer well past $7 million, according to the latest available figures.

If the contest goes all the way to a vote at DuPont’s annual meeting on 13 May, the two sides’ costs could exceed $23 million, based on estimates disclosed in early proxy forms.

The activist has still not said how much it will pay MacKenzie Partners for soliciting proxies ahead of the annual meeting, and has not disclosed the costs of its PR agency, Sard Verbinnen & Co, but said costs were expected to pass $8 million if the contest goes all the way to a vote in a preliminary proxy filing. In the same filing, the activist revealed that it had paid three of its four nominees $100,000 each for standing, as well as providing indemnities. The fourth nominee, Trian Partner Nelson Peltz, will not receive additional remuneration as a member of the slate.

Earlier this week, DuPont said it had spent $5.6 million to date on its response to the contested solicitation, and predicted that its total costs would exceed $15.4 million. It has a $2 million fee arrangement with Innisfree M&A, and has likely hired a number of PR and investment banking advisers to respond to Trian’s arguments. In its proxy statement, the company said that in addition to the proxy solicitor’s fees, it expected to pay for “fees of outside counsel and financial and other advisors to advise the Company in connection with a contested solicitation of proxies; increased mailing costs, such as the costs of additional mailings of solicitation material to stockholders, including printing costs, mailing costs and the reimbursement of reasonable expenses of banks, brokerage houses and other agents incurred in forwarding solicitation materials to beneficial owners of our common stock, as described above; the cost of maintaining our special website,; and possibly the costs of retaining an independent inspector of election.”

An Activist Insight study in September 2014 suggested that the average spend by activists on proxy solicitation fees, which do not include the cost of mailings or expenses, was just under $1 million at large-cap firms. Issuers were more likely to spend in the region of $1.6 million on this expense alone.

Expensive proxy fights are not uncommon, especially where litigation is involved, with such showdowns costing Sotheby’s and SandRidge Energy $24 million and $20.4 million respectively in recent years. Both figures included reimbursements to the activists, which are common when a settlement is agreed, or an activist wins control of a board.

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