Corteva averts proxy fight with board appointments
WILMINGTON – Agricultural chemical and seed company Corteva announced Friday morning that it has prevented a looming proxy fight with activist investment firm Starboard Value LP by agreeing to replace three of its board directors with suggested picks and appointing a fourth of its own selection.
The agreement comes less than two months after Starboard’s leader Jeffrey Smith called upon Corteva to replace CEO James “Jim” Collins Jr. and the majority of its board of directors for “a litany of missed promises and unforced errors” that Smith felt diminished the Wilmington-based company’s value.
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 ranging from AOL, Office Depot, Smithfield Foods, Yahoo, Macy’s and more.
It first voiced its concerns about Corteva’s financial performance in an October presentation, but released a January letter calling for the ousters.
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. This year it said that “idle talk without results or action is no longer acceptable.”
Starboard’s push to replace company leaders may have lost steam, however, after Corteva reported surprisingly good fourth quarter earnings in February – a $41 million net income versus analysts’ expectations of a quarterly loss in the typically slow winter months. The company also set out an ambitious forecast for 2021 of a 15% to 20% increase in operating earnings, totaling between $2.4 billion and $2.5 billion, ahead of analysts’ predictions.
That prefaced Friday’s announcement that three of Starboard’s previously announced board nominees – former Dow Agrosciences Vice President Janet Giesselman, former Monsanto Company Chief Strategy Officer Kerry J. Preete, and former Deere & Company Agricultural Equipment Operations President David Everitt – will join the board immediately. They will stand for election at the May 7 annual meeting but will be nominated by the company as current board members Lee M. Thomas, Robert Brown and Lois Juliber step down.
Karen H. Grimes, the former senior managing director, partner and equity portfolio manager of Wellington Management Group, will also join the board immediately, but stand for election in May with the support of the company.
With the addition of four new independent directors, the size of the board will temporarily increase from 12 to 16 directors. It will be reduced to 13 directors, 12 of whom will be independent, after the annual meeting. With the board moves, Starboard will drop its push for a larger slate of eight nominees, according to the agreement.
“We identified Corteva as a leader in its field with significant potential to improve both growth and profitability,” said Jeff Smith, CEO of Starboard, in a statement announcing the agreement. “After constructive discussions with Corteva’s board, we are pleased that these new directors will contribute their deep industry expertise and track records of value creation to help Corteva capitalize fully on its many opportunities.”
Gregory R. Page, independent chairman of Corteva, added in a statement that the board was “pleased to have reached this constructive outcome with Starboard which we believe is in the best interests of all our stockholders.”
The agreement appears to safeguard Collins, a DuPont veteran who has led the company since it spun off from the DowDuPont merger in June 2019. The board had defended his leadership under withering criticism by Starboard.
In the company’s February earnings call with analysts, Collins conceded that he was focused on increasing the company’s value for shareholders, both through its own product pipeline and also through possible acquisitions.
“While I am pleased with our progress, I am not satisfied with our relatively flat earnings over the past three years. We have learned, we’ve adapted, and are now very well-positioned to accelerate our growth and deliver on the tremendous opportunities we have created through our targeted investments and disciplined emphasis on cost and productivity,” Collins said.