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The Morning Brief: Trian Presses DuPont on Board Seat for Peltz

The Trian Fund Management proxy fight with DuPont is moving toward the boiling point after the chemical and life sciences giant named two new independent directors but made it clear it did not want Nelson Peltz, one of the co-founders of the New York activist hedge fund, on its board.

“We are disappointed that you refused to consider any path forward that did not involve putting you personally on the board,” DuPont wrote in a letter to Peltz after their meeting on February 4. DuPont also said it liked one of Trian’s nominees and would be willing to place that person on its board if Trian withdrew plans for its proxy fight. “Unfortunately, you insisted — while refusing to hear the details of our proposal — that you will not consider any proposal that does not include you personally being added to the DuPont Board,” DuPont wrote.

On Friday Trian responded publicly, calling the announcement a positive development since DuPont “appears to be acknowledging the need to upgrade its board…with individuals that have ‘fresh, independent, highly relevant perspectives.’” Trian also noted DuPont’s positive initiatives since the investor got involved. “Trian has consistently and purposefully avoided proxy contests over the years,” it states. “There have been many situations where we believe we could have gained more seats than we settled for, but instead we compromised to avoid unnecessary distraction.” Trian added: “We believe fellow stockholders want our nominees on the Board, specifically Mr. Peltz, based on their strong track records of value creation, relevant operating expertise, and new and different perspectives.”

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Meanwhile, Deutsche Bank Friday raised its price target on DuPont to $88 from $80 and maintained its Buy rating on the stock. The investment bank told clients in a note that the new target is based on its revised sum-of-the-parts valuation model, which now includes the assumption of $1 billion in additional cost savings/operational improvements over the next two to three years. It calls the newly named directors “a conduit to enable DuPont to continue further down its path towards greater efficiency, productivity and business optimization.”

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New York-based Sandell Asset Management Corp. issued a white paper that lays out in detail ways to boost the value of assisted-living operator Brookdale Senior Living, including placing its real estate properties into a real estate investment Trust and spinning it off tax-free to shareholders. The hedge fund also calls for revamping the board of directors in order to improve its corporate governance.

Sandell, headed by Thomas Sandell, believes these and other moves could unlock the stock’s intrinsic value, which it estimates at $49 per share. “We are disappointed that the Board has not committed to unlocking the significant value we believe is embedded in the company’s owned real-estate portfolio, especially with senior living real estate valuations at all-time highs,” Thomas Sandell said in a press release. On Friday, Brookdale stock surged about 6.7 percent to close at $36.88.

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In yet another unfolding battle, Barington Capital Group’s James Mitarotonda said he plans to nominate two directors at the upcoming annual meeting of The Eastern Company, calling its record of value creation for shareholders “extremely disappointing.” In a letter to Leonard Leganza, chairman, president and chief executive officer of the maker of industrial hardware, security products and metal products, the New York-based activist investor said, “We strongly believe that new, independent directors need to be promptly added to the Eastern board.”

The hedge fund manager says he represents a group of shareholders that owns over 5.2 percent of the company’s shares. He pointed out that the board has not added a new director since 1993 and its average director tenure is 27 years. “We have identified several individuals with exceptional backgrounds and experience that we believe can help you meaningfully improve long-term shareholder value,” Mitarotonda said in the letter.

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Deutsche Bank raised its price target on Twitter from $60 to $65 on Friday after the company reported results that some investors regarded as positive and others as negative. The bank reminded clients it likes consumer Internet companies that have strong product momentum and are massively under-monetized, like Twitter. It asserted that these companies eventually work their way toward higher valuations. “We expect some of the negative investor sentiment to shift to the background in 2015 given the number of potential catalysts emerging, including Google and a plethora of new products,” DB stated. Meanwhile, UBS raised its price target on Twitter from $55 to $58. Shares of Twitter surged more than 16 percent to close at $48.01.

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Jeffrey Altman’s Owl Creek Overseas Fund extended its losses, dropping 3.6 percent in January. The fund, managed by New York-based Owl Creek Asset Management, lost 8 percent last year after surging more than 48 percent in 2013, according to HSBC, which tracks hedge fund performance.

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The HFRI Fund Weighted Composite Index rose 0.46 percent in January in a month when many hedge funds lost money. The HFRI Macro Total Index jumped 2.62 percent while an activist index fell 2.71 percent.

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