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The Value Unlocker: Why Ed Breen Makes Investors Money

Yolowire - Wed Apr 17, 5:03PM CDT

Ed Breen's name has become synonymous with a specific kind of corporate transformation: the strategic dissection and value extraction from large, often unwieldy conglomerates. His track record across companies like Tyco International and DowDuPont has earned him a place on any list of "Who's Who Making Investors Money." But what exactly sets Breen apart, and how does he consistently unlock hidden value for investors?

From Scandal to Streamline: The Tyco Turnaround

Breen's first major test came in 2002 when he took the helm of Tyco International. The company, once a diversified powerhouse, was reeling from a massive accounting scandal. Investor confidence was shattered, and the future looked bleak. Breen's response was swift and decisive. He recognized that Tyco's vast array of businesses, everything from security systems to healthcare products, lacked focus and hindered overall efficiency.

His solution? Break it up. Over several years, Breen orchestrated the systematic divestiture of Tyco's various business segments, transforming it from a sprawling conglomerate into a collection of leaner, more focused companies. ADT (NYSE: ADT), TE Connectivity (NYSE: TEL), Covidien, now part of Medtronic (NYSE: MDT), and Tyco Electronics, now part of TE Connectivity, all emerged from this strategic dismantling.

The benefits were clear. Each newly independent company could now operate with a singular focus, streamlining operations and potentially attracting higher valuations from investors drawn to the specific expertise each company offered. For those who held onto Tyco stock during the breakup process, the rewards were significant. The strategy of unlocking hidden value within the conglomerate proved successful, delivering substantial gains for many investors.

Merger and Multiply: The DowDuPont Maneuver

Breen's next challenge came in the form of DuPont, a company facing pressure from activist investors who believed its stock price was undervalued. In 2015, Breen became CEO and initiated a strategic review. This review included evaluating a potential merger with a competitor, a strategy Breen was familiar with from his time at Tyco.

The result was a blockbuster $130 billion deal in 2017: the merger of Dow Chemical and DuPont to create DowDuPont, a behemoth in the chemical and materials science industries. While some questioned the logic of merging two already large companies, Breen saw an opportunity to eliminate redundancies and create a more competitive entity. However, this wasn't the end game. Like with Tyco, Breen envisioned a future where the combined strengths could be further amplified by strategic separation.

From the beginning, DowDuPont was planned as a temporary entity. Under Breen's leadership, the groundwork was laid for the eventual split into three independent, publicly traded companies: %DowInc (NYSE: $DOW) (materials science), %DuPont (NYSE: $DD) (specialty products), and %Corteva (NYSE: $CTVA) (agriculture). Jim Cramer lauded Breem’s DowDuPont strategy as “Tyco II: The Sequel.” This strategy mirrored the success of Tyco's breakup, allowing each company to focus on its core business and potentially achieve higher valuations. Breen currently holds the position of Executive Chairman and CEO of DuPont.

Breen's Strategic Acumen and a Little Company He’s Invested In

So, what exactly is Breen's secret sauce? His success hinges on a combination of strategic vision, financial acumen, and a willingness to take bold action. He identifies companies with potential for hidden value trapped within a complex structure. Through divestitures, mergers, or strategic splits, he unlocks this value, allowing investors to benefit from the focused potential of the newly formed entities.

This model aligns perfectly with that of %JerichoEnergyVentures (TSXV: $JEV) (OTC: $JROOF), a small company that Breen has invested in.

Jericho is an energy company positioned for the current energy transitions; owning, operating and developing both traditional %Hydrocarbon JV assets and advancing the low-carbon energy transition, with active investments in hydrogen. The company’s diverse portfolio includes:

- Wholly owned subsidiary Hydrogen Technologies, which delivers breakthrough, patented, %ZeroEmission boiler technology to the Commercial & Industrial heat and steam industry

- Investments and board positions in H2U Technologies (a breakthrough electrocatalyst and low-cost %Electrolyzer platform)

- Investments and board positions in Supercritical Solutions (developing the world's first, high pressure, ultra-efficient electrolyzer).

- Long-held producing oil and gas JV assets in Oklahoma (currently developing from cash flows in an effort to further increase production)

Coming public a decade ago as a hydrocarbon play, Jericho has actively pursued acquisitions to assemble the assets that make it a small conglomerate today.

Leading the Decarbonization Charge

Jericho’s %Hydrogen Technologies (HT) groundbreaking innovation, the Dynamic Combustion Chamber™ (DCC™), represents a significant leap forward in %CleanEnergy. This revolutionary hydrogen-fueled boiler eliminates greenhouse gas emissions in its process.

Each DCC™ installation makes a substantial environmental impact. Compared to traditional natural gas boilers, a single DCC™ unit permanently eliminates carbon dioxide emissions equivalent to roughly 2,500 cars annually. This achievement hasn't gone unnoticed. A major U.S. university recently selected DCC™ for a critical decarbonization project within its district heating system, highlighting the technology's effectiveness in achieving ambitious climate goals.

Numerous leading organizations and universities are actively exploring the implementation of DCC™ as a key strategy to reduce their Scope 1 carbon emissions. This strong industry engagement underscores the transformative potential of HT's technology.

JEV's commitment to hydrogen extends beyond HT. The company holds strategic investments and board positions in other promising players in the hydrogen space, including H2U Technologies and Supercritical Solutions. These investments position JEV at the forefront of developing both efficient hydrogen production (electrolyzers) and clean burning technologies (DCC™).

JEV's vision is further bolstered by the backing of prominent co-lead investors in its H2 portfolio companies, including Chris Sacca's Lowercarbon Capital, Dolby Family Ventures, and Hess Corp. (NYSE: HES). This collective effort positions JEV as a leader in driving the transition towards a clean hydrogen economy.

The Breen Playbook

Jericho has attracted world-class investors/backers including Belzberg Co, led by Strauss Zelnick, Chairman & CEO of Take-Two Interactive (NASDAQ: TTWO) and the Breen Family, led by Edward Breen.

Individuals were not identified, but it would seem plausible that Breen participated in a recent non-brokered private placement that raised gross proceeds of C$2.23 million for Jericho, selling shares at $0.20 each. This assumption of participation is undergirded by management’s comment that the financing “was led by insiders and existing shareholders of the Company.”

The Breen effect could be permeating into Jericho’s plans to build shareholder value. This week, Jericho announced initiating a strategic process to explore the spin-off and separate listing of its Hydrogen platform for the purposes of creating two independent, streamlined, pure-play companies focused on becoming leaders in their respective markets.

Each of the businesses would have a clear focus, an appropriate capital structure, a distinct and compelling investment thesis, and focused investments across its portfolio to deliver superior results. While there are no guarantees regarding the terms, timing or completion of this process, should it come to fruition, JEV management believes shareholders stand to benefit from the growth prospects as they would own shares of both pure-play H2 and Oil & Gas enterprises, with each focused on maximizing value and becoming a leader within its sector. This is an opportunity that simply doesn’t come around too often.

Sound familiar? It should because it is right out of the Breen playbook that generated so much wealth with his involvement in larger companies. Breen's reputation as a value unlocker remains strong. His ability to identify hidden potential within large corporations, execute complex transformations, and create investor value through strategic maneuvering has earned him a place among the most respected executives in the business world. For investors seeking exposure to companies poised for growth and value creation, Ed Breen's involvement is a signal worth paying attention to.

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