Hedge fund Third Point LLC said today that it has acquired a significant stake in Dow Chemical and wants the company to spin off its petrochemicals division.
Dow Chemical Co. shares jumped $2.25, or 5.2 percent, to $45.32 in morning trading after rising as high as $46.70 earlier. The stock has been trading around six-year highs.
Third Point says Dow is now its biggest investment but didn't specify how many shares it had acquired other than to say it was a significant position. CNBC reported that Third Point paid $1.3 billion for the stake.
The hedge fund said Dow stock has performed poorly compared to other chemical stocks and the S&P 500 and said a spinoff of the petrochemicals business would deliver more value for shareholders. The fund took a more positive view of Dow's agricultural science and electronics and functional materials businesses, as well as Dow Corning, a joint venture with Corning Inc. that makes silicone-based adhesives, sealants and other products.
Dow Chemical spokeswoman Rebecca Brantley said the company is aware of Third Point's position. Brantley said Dow welcomes constructive input and wants to continue a dialogue with shareholders, and that the company constantly reviews its strategy. She said Dow's investments have yielded value for shareholders and will continue to do so.
Dow sold its polypropylene licensing and catalysts business in October, bringing in $500 million, and said it wanted to raise $3 billion to $4 billion by divesting other businesses. In December Dow said it wanted to spin off or sell about 40 manufacturing plants in the next one to two years as it moves away from cyclical commodity products. Dow also said it reduced its debt by more than $2 billion in 2013.
The Midland, Mich., company had $13.73 billion in revenue in the quarter that ended Sept. 30.
Third Point disclosed its investment and its views in a quarterly letter to investors that it posted on the Internet.