The Morning Brief: Dow-DuPont Deal Would Combine Activist Targets

Call it a merger of activist targets. Wall Street and the greater business community is buzzing over the potential hook-up of chemical giants The Dow Chemical Company and DuPont, both of which have been in the cross-hairs of activist hedge fund firms for some time. And on Thursday Deutsche Bank raised its price target by 14 percent on both stocks, to $65 for Dow and $85 for DuPont. The bank tells clients the new targets assume a newly merged company generating $1.5 billion in operational improvements and other cost savings that exceed the $3 billion mentioned in published press reports. In addition, DB says its sum-of-the-parts analysis of the combined company results in a 17 percent upside in the stock prices.

Daniel Loeb’s New York-based Third Point has been pressing Midland, Michigan-based Dow to restructure since last year. Third Point was Dow’s seventh-largest shareholder at the end of the third quarter. Nelson Peltz’s New York-based Trian Fund Management lost its proxy fight with DuPont back in May. It was the fourth-largest shareholder at the end of the third quarter.

Shares of DuPont closed at $74.55 on Thursday, up slightly, while Dow declined by 3.6 percent, to $54.91.


Shares of The Men’s Wearhouse fell nearly 17 percent on Thursday, to $15.27, after Stifel Nicolaus downgraded the shares to hold and removed its $27 price target, noting there is “no visibility for near term improvement.” The investment bank adds in a note to clients that the clothing retailer is “increasingly challenged to drive traffic and sales.”

In late October, Ricky Sandler’s New York-based Eminence Capital raised its stake in the retailer to 9.9 percent. Shortly afterward, the stock plunged more than 43 percent after the company reported disappointing third-quarter comparable sales at its Jos. A. Bank stores, blaming the phase-out of its Buy-One-Get-Three promotions. Eminence subsequently boosted its stake to 12.7 percent.



Finally a bit of good news for David Einhorn’s New York-based Greenlight Capital. Shares of Consol Energy, one of its largest long positions, surged more than 10 percent on Thursday to close at $7.60. Even so, it remains the worst performing S&P 500 stock this year. Greenlight was also the tenth-largest shareholder at the end of the third quarter.


Kenneth Griffin is the latest among a growing list of hedge fund A-listers to publicly support Senator Marco Rubio’s bid to become the Republican nominee for president. “I’m really excited to be supporting Marco Rubio,” the founder of Chicago-based Citadel told CNBC. “He will be the next president of the United States.” Griffin follows fellow hedgies Cliff Asness of Greenwich, Connecticut-based AQR Capital Management and Paul Singer of New York-based Elliott Management in supporting Rubio.