DuPont this morning won its proxy battle with activist hedge fund Trian Fund Management (New York), as all four of the company's director nominees were re-elected to its board, company officials announced at its annual meeting Wednesday morning. DuPont is “encouraged by shareholder feedback and support for our transformation,” chair and CEO Ellen Kullman told the meeting. 

Trian founder and CEO Nelson Peltz told reporters that his fund will “continue to monitor” DuPont. He did not say whether he intends to sell all or part of the fund's stake in the company, noting that he is “keeping options open.” Trian spent about $8 million on the proxy fight, Peltz says. The fund had “overwhelming” support from mutual funds and institutional investors, he adds.

Peltz said DuPont “did a better job scaring people” and that the company likely won high support from retail shareholders – about one-third of its shareholder base. He also noted changes at DuPont, including the spinoff of Chemours, since Trian announced its stake in 2013. “The emperor has no clothes,” Peltz told reporters, adding shareholders should hold DuPont more accountable to its earnings targets in the future. In comments prior to the vote, Peltz said that Trian believes DuPont shares can reach $120 by the end of 2017. DuPont shares closed at $69.33 today, trading down about 5% after the announcement.

DuPont did not immediately disclose the exact composition of the shareholder vote. However, retail shareholders are “generally supportive of management,” Kullman told reporters. While retail shareholders often to do not vote their shares in board elections, “this time we got through to them,” Kullman adds.

Many people in the room - which included hundreds of DuPont shareholders - stood and clapped after the result of the board election was announced.

“I'm pleased with the outcome of the meeting,” Kullman says. Company management was planning to meet with shareholders later this spring in anticipation of the Chemours spinoff – which is expected to close in about six weeks – but the proxy fight pushed that process into April and May, she adds. DuPont spent about $15 million on the proxy fight, according to Kullman.

Kullman says she learned that "as a company, we don't tell our story well enough. Shareholders we met with thought of us as DuPont from twenty years ago, and not DuPont going forward." Peltz says Trian has acted as a "change agent" at DuPont, even though it won no board seats. DuPont has added directors and announced the Chemours spin-off since Trian went public with its criticisms of the company. However, DuPont has questioned Trian's taking credit for those changes, saying moves such as the spin-off are part of management's long-term strategy.

Whether or not Trian sells any, or all, of its shares, Peltz says he believes "DuPont shareholders will be less tolerant of missed targets, extraordinary charges, and value-destructive M&A" in the future. DuPont's earnings misses and guidance cuts in recent years were a key part of Trian's critique of the company, and Peltz says another miss is very possible this year. DuPont would need to grow earnings by 30% over the next three quarters to meet its full-year 2015 guidance, Peltz notes.

Kullman disputes Peltz's characterization of DuPont's shareholder base. "I'm not sure shareholders are tolerant at all" of missed targets, she says.

Trian is DuPont's fifth-largest shareholder, with a stake valued at about $1.8 billion. The proxy fight between DuPont and Trian began earlier this year, after Trian began publicly criticizing the company's management and strategy last fall. Trian's four nominees for DuPont's board were Peltz, former GE Asset Management CEO John Myers, former H.J. Heinz CFO Arthur Winkleblack, and former Rockwood CFO Robert Zatta. The re-elected DuPont board members include Alexander Cutler, the company's lead director. The vote marks Peltz's first defeat in a proxy fight since he launched Trian in 2005.