Third Point Pushes For Dow Plastics Spin-off, Buys T-Mobile, Ally

Jan 22 2014 | 1:42pm ET

Dow Chemical's planned $5 billion streamlining doesn't go quite far enough for Third Point.

After more than a month of talks between the company and the activist hedge fund, Third Point announced a large stake in Dow and called on it to spin-off its petrochemical business. Third Point called Dow's current strategy for the plastics business "misaligned with the changed landscape," and suggested that cost savings and improved operations could see the petrochemical business earning more than Dow currently earns as a whole.

"We believe the benefits from a spinoff, including financial uplift from operational improvements at Dow Petchem Co. and the potential valuation uplift from increased business focus and disclosure, far outweigh the supposed integration benefits," Third Point said.

Third Point, which owns 6.6% of Dow, its largest holding, suggested the company hire external advisers to review its strategy, and institute a "meaningful share buyback."

What Third Point has not done is call for any heads at Dow. The hedge fund has not met with Dow's leaders, but the company expressed an openness to hearing the hedge fund out.

In its quarterly letter to investors, Third Point also announced big new stakes in T-Mobile US and Ally Financial. The former, the hedge fund believes, is ripe for an acquisition by either Sprint Corp. or Dish Network. The latter, it said, is on track to significantly increase earnings.


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