Specifically, the company should split into a more profitable Dow Petchem Co. and a "true" specialty firm called Dow Specialty Co., according to the investment letter.
"Dow's petrochemical operational strategy has been to migrate downstream, supposedly to earn higher margins," the letter says. But Third Point argues that strategy "seems misaligned" given a "commoditization of numerous downstream derivatives margins," which has been driven by emerging markets growing their downstream derivatives capacity and by a North American shale energy boom that's reduced raw material costs. Third Point is calling for a standalone company called Dow Petchem that houses Dow's commodity petrochemical segments and that moves away from focusing downstream. The fund says the company's other businesses would be dubbed Dow Specialty -- "the specialty chemicals leader that Dow has aspired to become for much of the past decade."
Rebecca Bentley, a spokeswoman for Dow Chemical, said in a statement that the company had delivered shareholder value. “We engage with all of our owners to understand their views and we welcome all constructive input with a common goal of enhancing long-term value,” she said. “We constantly review our company at the management and board level to increase our shareholder value and competitiveness.”
In December, Dow Chemical announced a plan to shed about $5 billion worth of assets in a streamlining effort.
Loeb, an investor known for his poison pen, has previously taken on companies likes Yahoo and Sony. The Yahoo campaign culminated in the hiring of Marissa Mayer as chief executive of the web company. But Sony has rebuffed Mr. Loeb’s proposal that it spin off part of its entertainment arm.