DuPont should stay whole, says boss who split Tyco

As chief executive of Tyco International from 2002-12, Bucks County resident Edward Breen broke the conglomerate into five successor companies: which did well, enriching himself and other shareholders.

But as a new director of the DuPont Co., Breen opposes an accelerated break-up of the bio/chemical giant and its research arm, as envisioned by billionaire activist investor Nelson Peltz, whose Trian Fund Management is trying to unseat four of Breen's allies in a contested board election. In this letter today, Trian says DuPont is overpaying CEO Ellen Kullman and other managers, even as DuPont shares and most of its businesses fail to meet targets.

Breen and ex-LyondellBassell chief Jim Gallogly joined DuPont's board after declining invitations to work with Trian. In a mailing today, they tell DuPont shareholders why. You can read their comments here. Highlights:

BREEN:  At Tyco, we faced a very different set of facts than at DuPont – and the situation at Tyco required extreme measures. DuPont's results demonstrate the rigor of the analysis and execution under Chair and CEO Ellen Kullman's leadership...

Trian seems to employ the same strategy in each of their investments, regardless of the specific facts at hand. Their plan to break up and add leverage to DuPont is part of the playbook that they've applied to companies in other industries, and it has produced negative results outside their core competency, which is really the consumer/retail sector.

Having separated Tyco into five independent companies, I understand the value of deconsolidation.

However, the biggest difference between Tyco and DuPont is that, at Tyco, the businesses had nothing in common with each other. There was no competency to drive a consolidated platform.

This is not the case at DuPont, where the science capabilities span the whole platform, form its core competency and are a major source of advantage...

[DuPont's board and management enjoy] a healthy dynamic. The DuPont Board is open and actively engaged, and there is a good balance between respect for management and a willingness and ability to challenge it. That's largely a function of directors having the industry knowledge and business expertise to ask tough questions and stress-test the answers to maintain management accountability.

GALLOGLY: DuPont is an iconic company whose work makes a real difference, and it's at a crucial moment in its history. It has a world-class Board and management team...

Total shareholder returns... have outperformed across the board. That reflects the fundamental progress that Ellen and her team have made in the transformation. refining the portfolio to focus on businesses that offer the greatest opportunity and leveraging the Company's competitive advantages... T

hey recognize that more work needs to be done. If you look at the businesses that will make up DuPont after the spin-off of Chemours, you'll see impressive earnings growth under this management team. That's the best proof that their plan is working.

[Before he joined DuPont's board, Peltz's firm] approached me and it was clear they wanted someone to be on their slate who would represent Trian. They wanted a director who would be on "their team" in the boardroom to push Trian's agenda to break up the company. I didn't agree with that. A director should go into a boardroom with an objective, open mind and without a preconceived agenda. I don't believe any Board member should be on the team of one shareholder. Now that I am on the Board of DuPont, I'm on the team of all DuPont shareholders.

They also wanted their slate to serve in a very operational role. I don't think that is the proper role for a Board, which should oversee, guide and hold management accountable. While Board members can certainly share their experiences, they should not try to do management's job.

I'm a big believer in the importance of good governance and being open to change. The current DuPont Board and management team are driving major change, the Company has been transforming itself, and I wanted to be a part of that.