Dow Chemical, Third Point Settle Board Dispute--Update

By David Benoit And Joann S. Lublin 

Dow Chemical Co. and Third Point LLC settled a looming proxy fight Friday by adding four new directors next year, including two the activist investor had proposed.

Third Point also agreed to a one-year standstill agreement, meaning the firm won't publicly criticize the chemicals company.

The settlement comes a week after Third Point, run by Daniel Loeb, had launched a renewed attack on Dow and puts to rest the possibility of a long fight over the chemical giant's board.

Shares of Dow Chemical, up 30% over the past 12 months, rose 2.2% in morning trading to $52.64.

Dow will add Raymond Milchovich and Robert S. "Steve" Miller, Third Point's suggested nominees, to the board, along with two other independent nominees: Richard Davis and Mark Loughridge.

Mr. Milchovich is a former chief executive at Foster Wheeler AG. Mr. Miller is a turnaround specialist who was most recently chief executive at Hawker Beechcraft Inc. and is chairman of American International Group Inc. Third Point has said they have turnaround skills that "Dow desperately needs."

In an interview Friday, Mr. Miller confirmed he and Mr. Milchovich will receive the controversial pay package from Third Point, with payment based on gains in Dow's share price after three and five years.

"I have a significant incentive to create long-term shareholder value over a three- to five-year period," Mr. Miller said. "But that indeed should be the primary objective of every director."

Mr. Davis, meanwhile, is the chairman and chief executive of U.S. Bancorp, and Mr. Loughridge is a former chief financial officer of International Business Machines Corp.

The addition of four Dow directors should help the board review the company's strategy from a different viewpoint, Mr. Miller suggested. "Fresh eyes can take a new look at the capital allocations and at the business segments that Dow should focus on," he said.

Third Point's moves last week came after Dow had privately rejected its nominees, partially because of how Third Point wanted to pay them, people familiar with the matter have said. The rejection led Third Point to launch a website and attack the performance of the company and Chief Executive Andrew Liveris, which set the possibility of a proxy fight in motion. The website was taken down early Friday.

Write to David Benoit at [e-mail] and Joann S. Lublin at [e-mail]

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