Activist investor calls to replace Corteva CEO, control board
WILMINGTON – Activist investor Jeffrey Smith, of Starboard Value LP, announced publicly Thursday that his firm is targeting the agricultural chemical and seed company Corteva, evoking memories of the company’s former parent DuPont’s ugly battle with activist investors.
Starboard is one of the most well-known and feared activist firms on Wall Street, as it succeeded in replacing all of Darden Restaurants’ board in a high-profile 2014 bid. It has also targeted other companies including AOL, Office Depot, Smithfield Foods, Yahoo, Macy’s and more.
Starboard first voiced its concerns about Wilmington-headquartered Corteva’s financial performance in an October presentation, but it has now released a letter calling for the ouster of CEO James “Jim” Collins Jr. and the replacement of the majority of the board of directors, which has so far backed the chief executive.
“Since our initial investment over 18 months ago, we have watched with increasing dismay as management continues to take credit for achieving ever-increasing synergy milestones without consequent improvement in profitability. A litany of missed promises and unforced errors have furthered our conviction that current leadership is ill-equipped to maximize the value of Corteva’s assets,” Starboard wrote in its letter.
The activist investment firm, which owns about 1.5% of Corteva across a variety of entities, reportedly first began sharing its concerns privately with Corteva in September and expressing them publicly a month later. It now says that “idle talk without results or action is no longer acceptable.”
Calling Collins’ performance “incredibly disappointing,” Starboard reported that it had identified a worthy replacement who was willing to start right away but did not disclose his or her identity. The activist firm said that Corteva’s board has not yet spoken to that individual.
Due in part to the board’s continued support of Collins, Starboard said that it has nominated eight candidates for Corteva’s 12-member board in the 2021 Annual Meeting, which has yet to be scheduled. The company is next scheduled to speak publicly Feb. 4, when it releases its fourth quarter earnings report.
“We believe shareholders deserve a board that is unburdened by past loyalties, demands accountability, and if necessary, is unafraid to seek out best-in-class talent capable of maximizing the company’s incredible potential,” Starboard wrote.
Collins, a DuPont veteran who has led the company since it spun off from the DowDuPont merger in June 2019, was asked about Starboard’s earlier criticisms by analysts in Corteva’s November earnings call, and he replied that the company did have room to improve margins, but “the only question in that whole discussion is our view of the timing of that improvement.”
On Thursday afternoon, Corteva Board Chair Greg Page issued a statement defending Collins and stating that “the board is unanimous in its view that Jim Collins’ proven track record and industry expertise make him exactly the right leader to assure the company delivers on its potential during this critical period.”
In his own statement, Collins noted that the company has seen shareholder return of 80% since its creation less than two years ago, adding that it is “well-positioned to accelerate the realization of our value creation opportunity in 2021 and beyond.” The company’s 52-week high share value of $44.96 came just this month, as agricultural markets have been buoyed by investors.
Among the metrics that the company promoted in its rebuttal to Starboard was that its operating EBITDA is up 5% in the first nine months of 2020, it has launched 16 new products since 2019, it has made significant reductions in its real estate footprint and a 16% cut in headcount, and intends to complete a $1 billion stock buyback program by the end of 2021, about six months earlier than expected.
The market initially pushed Corteva’s share value 2% higher at open Thursday after the Wall Street Journal first reported the news of the looming proxy fight Wednesday night, but most of those gains have been shed by sales as of midday Thursday. It remains to be seen whether Corteva shareholders will back the criticisms of Starboard or mount a defense of the current leadership.
The company has more than 20,000 employees worldwide, although its workforce in Delaware is small and primarily limited to corporate officers with most sites located in the Midwest, and a more than $32 billion market cap.
Its emerging fight with Starboard will remind many of DuPont’s fight with activist investor Nelson Peltz, of Trian Partners, who led the push to replace part of the Delaware mainstay’s board against the wishes of then-DuPont CEO Ellen Kullman in 2015. The company staved off the high-profile challenge, but Kullman retired just months later and much of Peltz’s wishes were ultimately realized through a variety of mergers, sell offs and spinoffs.
Starboard’s slate of proposed board members include Smith as well as former LyondellBasell Industries N.V. CEO James Gallogly, former Dow Agrosciences Vice President Janet Giesselman, former Monsanto Company Chief Strategy Officer Kerry J. Preete, former Bacardi Chief Finance Officer Jacques Croisetière, former Deere & Company Agricultural Equipment Operations President David Everitt, Susan Schnabel, co-founder and co-managing partner of aPriori Capital Partners; and Lisa Crutchfield, managing principal of Hudson Strategic Advisers LLC.