DuPont’s Interim Boss Is a Breakup Expert
Former Tyco chief broke up conglomerate twice, raising possibility of future split at DuPont
Edward D. Breen, the new temporary leader of DuPont Co., knows a lot about breaking up big businesses, a skill he could put to use at the chemicals conglomerate that has fought off calls for a split for most of this year.
During his decadelong tenure as chief executive of Tyco International Ltd., Mr. Breen, now 59, broke up the company twice.
First, in 2007, when Tyco was a $41 billion conglomerate with nearly 240,000 employees, he split it apart, hiving off two units: a medical-products company which became Covidien PLC and an electronics-component maker, now known as TE Connectivity Ltd.
The second time around, he spun off its ADT residential-alarm business and a unit that made industrial valves and pipes, leaving Tyco as a provider of security and fire systems—a comedown for a company that bought hundreds of businesses over five decades.
“He’s not shy about doing breakups,’’ said Michael Useem, a management professor at University of Pennsylvania’s Wharton School who has known Mr. Breen for years and advised Tyco about governance issues.
Mr. Breen, who joined DuPont’s board in February, takes over next week on an interim basis as CEO and chairman from Ellen Kullman who Monday announced her surprise retirement. Ms. Kullman survived a bitter proxy fight waged this spring by Nelson Peltz’s Trian Fund Management LP, which had sought to split the 213-year-old maker of Kevlar fibers and Pioneer corn seeds into two separate businesses, one focused on agriculture and the other on industrial materials.
Ms. Kullman—with the support of DuPont’s board of directors, including Mr. Breen—prevailed in the proxy vote that rejected Trian’s strategy and opposed the fund’s attempt to nominate directors for the board. But the company’s results worsened and Ms. Kullman ultimately agreed to step down.
Now as Mr. Breen takes the reins as interim CEO, his previous support for keeping the company together may evolve especially in the face of deteriorating results. While announcing the CEO change Monday, DuPont also lowered its earnings forecast for this year.
During a conference call after Monday’s announcement, Mr. Breen said he planned “a deep dive” into DuPont’s cost structure and to evaluate its investment decisions to make sure shareholders get appropriate returns.
In the past, he has defended DuPont’s structure and credited Ms. Kullman with already restructuring the company.
In a company presentation for investors earlier this year, he was quoted as saying that at Tyco “we faced a very different set of facts” that “required extreme measures.”
Mr. Breen is committed “to effective decision-making based on the specific facts and circumstances of that particular company,’’ a DuPont spokeswoman said Tuesday.
On a call Monday with analysts, Mr. Breen said his appointment as interim CEO shouldn’t be a signal for strategy change.
“I would not read anything into that,” he said.
Even so, analysts and investors couldn’t help but read into it. Deutsche Bank analysts in a report Tuesday said they view a breakup as “highly likely” because Ms. Kullman was viewed as “the single biggest impediment, in our view, to a breakup of DuPont.”
Citigroup analysts said in a report they see “significant strategic changes” and suggested that splitting up like Trian suggested could lead the separate agricultural company to find a deal with Dow Chemical Co.
Former colleagues at Tyco recall Mr. Breen being a detail-oriented executive who kept a close eye on operational matters and held nothing sacred. Bruce Gordon, a former Tyco director who now is chairman of the spun-off ADT Corp., recalled how Mr. Breen knew everything from the size of each unit’s sales force to its customer attrition rate.
When he assumed the helm at Tyco, Mr. Breen had to make some tough decisions. The former Motorola Inc. president took over from L. Dennis Kozlowski in 2002, who lost his job amid imminent charges of sales-tax evasion. That probe grew into a bigger case, and Mr. Kozlowski was criminally convicted of systematically looting the company and served more than six years in prison.
In the face of a liquidity crisis and accounting mess, Mr. Breen cast the deciding vote to replace the entire Tyco board and shed almost 300 people at the corporate headquarters.
At DuPont, Mr. Breen “will get down very deeply into these businesses,’’ and decide whether all of DuPont units “are worth keeping,’’ said Jack Krol, a retired DuPont CEO who was Tyco’s lead independent director during most of Mr. Breen’s tenure.
It wasn’t immediately clear if Mr. Breen—who remains Tyco chairman and is the lead director for Comcast Corp.—wants to be considered for the permanent top spot at DuPont. However, “Ed will participate in the search for the new CEO,’’ the company spokeswoman said.
DuPont’s next boss will still have to contend with Trian. The fund has continued to buy shares in DuPont even after losing the battle for board seats, said Ed Garden, Trian’s chief investment officer in a CNBC interview before Monday’s announcement. Trian declined to comment.
Despite backing the breakup of Tyco, Mr. Breen isn’t in favor of splitting apart companies in response to activist pressure. “If activists find a weakness, they jump,’’ he said during a 2012 interview with The Wall Street Journal. “It is not the most elegant way to get it done.”