* Says would have considered Trian nominee but not full slate
* Trian sticks to demand for Peltz addition to board
* Investor says move 'draws a line in the sand' (Adds comment from DuPont investor)
By Swetha Gopinath
Feb 5 (Reuters) - DuPont said on Thursday it rebuffed an attempt by activist shareholder Trian Fund Management to put its chief executive, Nelson Peltz, on the chemical maker's board, instead naming two of its own nominees as directors.
The move appears to set the stage for a proxy battle with Trian, which is seeking board seats to turn up the pressure on the company to break up and continued to insist that all four of its nominees be added to the board.
DuPont said it remained open to a dialogue with Peltz and would have considered a Trian nominee as a potential addition to its board if the fund had agreed to withdraw its slate of nominees.
"We are disappointed that you refused to consider any path forward that did not involve putting you personally on the board," DuPont said in a letter to Peltz, according to a regulatory filing.
Trian later responded by saying that while it respected the records of "stockholder value creation" of DuPont's latest board nominees, Tyco International Plc Chairman Edward Breen and former LyondellBasell Industries NV Chief Executive James Gallogly, there was more to be done to unlock "significant further value for shareholders."
Specifically, it urged DuPont to acquiesce to the appointment of its full slate of board nominees including Peltz himself "based on their strong track records of value creation, relevant operating expertise, and new and different perspectives."
Trian and investment funds it manages own 24.3 million shares in the company formally known as E I du Pont de Nemours and Co, equivalent to a 2.68 percent stake.
One large investor in Dupont said he was surprised at the company's resistance to a more thorough board shakeup as happened at DuPont rival Dow Chemical Co, which recently averted a proxy fight with Dan Loeb's hedge fund, Third Point LLC, by agreeing to add four independent directors to its board.
"This really draws a line in the sand that I think is hard to go back from and I think it is likely to become more heated between now and the shareholder meeting," said the investor, who wished to remain anonymous because he is not permitted to speak to the media. "One of the things we will weigh in our analysis is are both people being reasonable in their demands?"
DuPont has repeatedly rejected Peltz's proposal that it split itself, highlighting the benefits of keeping its units together.
The company, however, is spinning off its performance chemicals business, which makes materials such as Teflon and represents nearly 20 percent of revenue.
DuPont said Breen and Gallogly, neither of whom were among Trian's nominees, are experienced in corporate restructuring. Their appointment on Thursday keeps the number of directors unchanged at 14.
Breen, who was CEO of Tyco from 2002 to 2012, oversaw two break-ups of the company. Gallogly guided LyondellBasell out of bankruptcy within a year.
The duo replace Curtis Crawford and Richard Brown, who will initially serve as consultants to the performance chemicals unit. Brown will serve as non-executive chairman after the separation of the unit, named Chemours Co.
DuPont's shares rose 3.1 percent to close at $76.00 in afternoon trading on the New York Stock Exchange, its highest close in over 16 years. (Additional reporting by Mike Stone and Jessica Toonkel in New York; Editing by Don Sebastian, Savio D'Souza and Christian Plumb)