Loeb Wins Proxy Support in Fight for Campbell Soup's Board

(Bloomberg) -- Dan Loeb’s efforts to revamp the board of Campbell Soup Co. got a boost with two prominent shareholder advisory firms throwing their support behind his efforts to push for changes at the soup and snack maker.

Institutional Shareholder Services Inc. urged Campbell’s shareholders to vote for Loeb’s slate of five director candidates. Glass Lewis & Co. gave Loeb’s efforts a partial endorsement, saying investors should vote for three of his nominees.

Campbell’s underperformance and weak fundamentals “appear directly linked to shortcomings in the company’s acquisition strategy, poor execution of mergers, and a lack of focus on the company’s core business,” ISS said Wednesday in its recommendation. “Even when accounting for the headwinds in the packaged food industry, Campbell has substantially trailed peers as a result of these missteps.”

Shares in Campbell fell 0.7 percent in New York trading Thursday to $38.88 apiece as of 11:06 a.m.

Campbell said in separate statements it “strongly disagreed” with ISS but “largely agrees” with the conclusions reached by Glass Lewis. It continued to urge shareholders to vote for its slate of 12 incumbent directors.

‘Convincing Case’

Glass Lewis wrote in its report late Wednesday that Loeb’s New York-based hedge fund Third Point had made a “convincing case” for board change. It recommended shareholders vote in favor of appointing Sarah Hofstetter, Kurt Schmidt and William Toler.

“Investor support for these Third Point nominees would signal a demand for boardroom accountability and we believe their addition would help to restore investor confidence in the company and the board,” Glass Lewis said.

Glass Lewis recommended withholding support from Loeb’s other two nominees, Bozoma Saint John and Third Point partner Munib Islam, at the annual general meeting slated for Nov. 29. Glass Lewis said it didn’t think a Third Point representative would be “warranted or additive at this time.”

The shareholder advisory firm also advised shareholders withhold votes for Campbell’s chairman, Les Vinney, as well as Nick Shreiber, Randall Larimore, Mary Alice Dorrance Malone and Bennett Dorrance on the company’s slate.

Industry Expertise

“ISS and Glass Lewis sent a powerful message to Campbell shareholders that the time has come for significant change to the company’s board," Third Point said in a statement Thursday. "Our nominees will bring the necessary expertise and experience required to immediately begin collaborating with their fellow board members and implementing a new strategy to refresh the recipe at Campbell."

Third Point, which owns a 7 percent stake in the soup maker, had sought to replace Campbell’s entire board in an effort to improve the company’s lagging performance and had originally called for an outright sale. It has since backed off those calls and last week, Loeb scaled back his slate to five nominees.

The company countered by saying it had offered to give seats to two of Loeb’s nominees but that it wouldn’t appoint any Third Point employees to the board.

Loeb responded in a letter to the company Monday saying it was the “norm” for a shareholder activist to be elected to the board in similar situations, an assertion supported by ISS.

“The dissident slate seems well qualified to contribute to the company’s turnaround by providing relevant industry expertise, fresh ideas, and a greater sense of urgency,” ISS said in its report. “A robust dissident presence short of a majority and including a direct representative of a significant unaffiliated shareholder seems appropriate in this situation.”

Uphill Battle

Campbell reiterated that it had offered two seats on its board to Third Point’s nominees, Hofstetter and Schmidt, and that Third Point had rejected that offer and decided to pursue its "wasteful and distracting proxy fight." It said it was pleased Glass Lewis had agreed that adding a Third Point employee would not be in the best interest of shareholders.

Loeb still faces an uphill battle to get his nominees elected. The descendants of Campbell Soup’s founder, who collectively hold about 41 percent of the company’s shares, have committed to supporting the company’s slate of incumbent directors.

Campbell, based in Camden, New Jersey, has faced declining sales as consumers look for less-processed products, turning away from its namesake soup. A push to add healthier brands to its portfolio was hampered by operational issues. The company’s management team, which is also searching for a permanent chief executive officer, faces pressure to prove it can ignite growth.

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