By Philip van Doorn, MarketWatch
David Marcus, chief executive officer of Evermore Global Advisors, is attempting to identify companies that are transforming their businesses and create value for shareholders through mergers, spinoffs, asset sales or improved efficiency.
Evermore, based in Summit, N.J., has $1.1 billion in assets under management, including $558 million in the Evermore Global Value Fund /zigman2/quotes/200165874/realtime EVGBX -0.42% . Marcus meets with as many management teams as possible, especially in Europe, to assess their business strategies.
Three companies he’s focusing on are DowDuPont, Vivendi SA and Fiat Chrysler Automobiles. /zigman2/quotes/202179234/delayed FR:VIV -1.73%
In August, Marcus said he expected DowDuPont to be “a gift that keeps on giving” for patient investors because of CEO Edward Breen’s plan to split the company into three focused publicly traded entities — the original plan when the former DuPont & Co. merged with the old Dow Chemical in September 2017.
DowDuPont’s commodity chemical business is scheduled to be spun off April 1 as the new Dow. That action will be followed by the splitting of the remaining assets into Corteva (agricultural chemicals) and the new DuPont (specialty chemicals). DowDuPont has already announced that the new Dow will begin paying $2.1 billion in annual dividends and initiate a $3 billion share-buyback program.
Marcus said he plans “to keep all the pieces” of the separated DowDuPont “at least initially.”
“The market doesn’t usually revalue these stocks until the spinoff actually happens,” Marcus said in an interview March 27. Indeed, after he discussed DowDuPont’s plan to unlock value with MarketWatch on Aug. 14, the shares pulled back 20% (with dividends reinvested) through the end of 2018. (The stock was flat for 2019 through March 26.) The brutal decline for DowDuPont helped feed a 21% drop for the Evermore Global Value Fund’s investor share class in 2018.
Marcus said “significant fears about the global slowdown” were the main factor driving down DowDuPont’s share price, but his firm “bought from last summer through year-end,” after initially buying shares in June, to take advantage of the falling price.
When discussing the fund’s performance in 2018, Marcus said, “we are special-situation investors, which means a lot of investments we have trigger from announcements breakups and restructuring.” And that means the fund’s performance will often be disconnected to the performance of the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.12% , the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.88% and the fund’s Morningstar category.
Marcus said he had reached out to many shareholders of the fund to explain the poor recent performance and how it related to his strategy. He is confident about the setup now.
“This is probably the cheapest portfolio we have since I started the firm about 10 years ago,” he said.
After the split-up of DowDuPont, Breen (whom Marcus called “the architect of the breakup”) will be CEO of the new DuPont. Marcus says he expects more spinoffs to come, unlocking more value for investors as the new DuPont’s specialty chemicals business is already organized into what could eventually become four separate companies.
Vivendi /zigman2/quotes/202179234/delayed FR:VIV -1.73% /zigman2/quotes/204915844/composite VIVHY -1.92% /zigman2/quotes/204607342/composite VIVEF -1.35% is effectively controlled by Bollore SA /zigman2/quotes/206166135/delayed FR:BOL -2.45% /zigman2/quotes/209568566/composite BOIVF -2.45% , which owns 26% of Vivendi’s shares. The Evermore Global Value Fund holds shares in both companies.