Trian Partners 13D Investor Summit

Nelson Peltz was kind enough to post his presentation on DuPont online.

It’s a short 12-slide presentation. Here’s the takeaway.

When Trian issued its Summary White Paper (September 2014), Trian arrived at an implied target value per share in excess of $120(1) by the end of 2017, a 21% internal rate of return (IRR) for shareholders holding DuPont stock during this period
Key Assumptions for Trian’s Analysis:

– Valuation: 9.9x blended NTM EBITDA multiple(2)

– Best-in-class operating performance: Revenue growth and margins in-line with peers and management long-term targets

If one assumes a ~30% flow-through on incremental revenue, model implies less than $1bn of cost savings

– Prudent Leverage: 2x net debt/EBITDA across the businesses as a whole; maintain investment grade rating

– Focus on Returns to Shareholders: Grow dividend at 10% CAGR; assuming all excess free cash flow returned to shareholders

– Tax Rate: 33% tax rate (up from 22% expected in 2015(3)) across the business to provide flexibility with free cash flow

The CEO sold ~54%(1) of her stock after Trian first invested (~$80m)(2)
23%(1) of her equity position was sold in the week after the release of Trian’s Summary White Paper (September 2014), when the stock hit a new 15-year-high of $72.83
Despite rhetoric about a “higher growth, higher value strategy,” the CEO is not willing to “put her money where her mouth is”
Sold from long-term incentives and from stock options she had been granted, most of which did not expire until 2016 or 2017
We believe the reason management receives equity as part of compensation is to ensure their interests are aligned with the long-term interests of shareholders. The intention is not for management to sell prematurely
Ask yourself: If the CEO and Board members truly believed in their strategy wouldn’t they be buying stock?

See full presentation below.