Dow Chemical triples share buyback to $4.5 bn as activist investor pushes for split

Dow Chemical Co, under pressure from activist investor Third Point LLC to split into two, tripled a share-buyback programme to $4.5 billion and increased its dividend, even as it reported better-than-expected fourth-quarter earnings and sales.

Profit excluding some one-time items stood at 65 cents a share on sales of $14.4 billion according to Midland, Michigan-based Dow's statement today.

Dow chairman and chief executive officer Andrew Liveris is facing investor pressure to improve returns after shares stayed stagnant during his nine years.

According to billionaire Dan Loeb-founded Third Point, Dow could add billions of dollars in profits by ending the integration of its commodity and specialty materials businesses. According to Liveris, Dow achieved its 2013 goals for cutting costs and debt, selling underperforming assets and improving earnings.

''This is clear evidence of our ability to manage all aspects of our integrated business to generate strong financial performance,'' Liveris said in the statement. ''We are in a strong position to further enhance shareholder value.''

According to Third Point, which made Dow its top holding this month, Dow could spin off  commodity chemicals and plastics as a separate company. Even though Dow's shares rose around 27 per cent in the 12 months before Loeb disclosing his stake, they trailed more focused competitors including LyondellBasell Industries NV and Westlake Chemical Corp.

Dow,  the largest US chemical maker, and rival DuPont have in recent times seen increased investor activism over driving up shareholder returns.

Loeb wants Dow Chemical, which is its largest investment, to spin off its petrochemical businesses and speed up transition to a company focused on agriculture, electronics, pharmaceuticals, and food.

While Dow Chemical's chief executive Andrew Liveris said Loeb's demands were aligned to the company's strategy of focusing on specialty chemicals, he pointed to the value of the company's lucrative raw material businesses.

Speaking on a conference call with analysts, Liveris said, the company was a complete value chain, arguing that Dow Chemical could no longer be called a petrochemical company due to the sale off commodity assets worth over $10 billion since 2006.

Dow Chemical was dependent on its commoditised raw materials businesses to keep costs down at its high-growth specialty chemicals businesses - a strategy that, according to some analysts, seemed to be working, as was evident from the strong fourth-quarter results.

Reuters quoted UBS analyst John Roberts as saying as long as earnings estimates and the stock were going higher, he thought Andrew had people's support.