Dan Loeb Ramps Up Pressure on Campbell Soup, Urges Asset Sales

(Bloomberg) -- Dan Loeb, who’s seeking a complete overhaul of Campbell Soup Co.’s board, said the embattled company could fetch as much as $58 per share in a sale and should consider offloading brands like Pop Secret and Pepperidge Farms Frozen Cakes.

The activist investor, who is urging significant changes to help modernize the iconic American company, argues in a new 45-page investor presentation Monday that Campbell has been mismanaged. He said it missed the shift in consumer preferences for natural and organic ingredients, and was forced to make major acquisitions to try to catch up, including its “ill-timed” $6 billion purchase of Snyder’s-Lance in March.

“We believe the past year has been particularly disastrous,” Loeb’s New York hedge fund Third Point told fellow shareholders in a letter dated Sept. 28. “Campbell’s key brands are rapidly losing market share. Its leadership drastically overpaid for bad deals that saddled the company with way too much debt.”

Loeb also said earnings per share in the most recent quarter were down more than 50 percent, that the company has no permanent chief executive officer and is “being run temporarily by a board member who has no food or beverage experience.”

The company’s shares fell 0.5 percent to $36.45 at 12:10 p.m. in New York Monday. They closed at $36.63 on Friday, giving Campbell a market valuation of $11 billion.

Campbell’s board, after conducting a strategic review of the business this summer, stopped short of putting the company up for sale. In a statement, the company reiterated that the review had resulted in a “clear and executable path forward to maximize shareholder value.’

“The board considered all options during the review, including selling the company,” Campbell said in the statement. “The board is confident that this plan is the best path forward for Campbell at this time. Management is focused on implementing the plan and setting the foundation for sustainable, profitable growth in fiscal 2020 and beyond. Importantly, the board remains committed to evaluating all strategic options to enhance value in the future.”

Strategic Review

Third Point also sent out a 16-page booklet to shareholders with the aim of winning over retail investors to its cause as it ratcheted up pressure on Campbell.

In the investor presentation Monday, Loeb continues to advocate for a sale of all or part of the company. He also questioned whether everything was truly “on the table” during a recent strategic review, which resulted in the Campbell saying in August it would sell its international operations and fresh-food unit.

He said the incumbent board “may have failed to perform its fiduciary duty to act in the best interests of all shareholders in order to protect the interests of corporate insiders and wealthy heirs.”

Loeb said he believed Campbell could fetch between $52 and $58 per share, based on recent transactions in the food sector, including 3G Capital Inc. and Berkshire Hathaway Inc.’s purchase of HJ Heinz Co. in 2013, Heinz’s subsequent purchase of Kraft Foods Group Inc. in 2015, and Conagra Brands Inc.’s deal for Pinnacle Foods Inc. this year.

Soup Sales

Campbell needs to focus on growing its soup business rather than “apologizing for it,” in addition to cutting costs and modernizing its offerings, the presentation shows. Loeb backs using the proceeds from the sale of certain non-core snacks, including microwave popcorn brand Pop Secret, to reinvest in other brands or to repay debt.

He also argues the company could save about $295 million from properly integrating Snyder’s-Lance.

Loeb, who is aiming to replace the entire 12-person board, has set his sights on two directors in particular, both descendants of John Dorrance, the early 20th century Campbell executive credited with inventing condensed soup.

Bennett Dorrance and Mary Alice Dorrance Malone, the sibling pair that has served on the board for decades, collectively hold about 33 percent of the company’s stock, according to a proxy filing last year, and form a major hurdle in Loeb’s efforts to reconstitute the board.

Loeb’s own nominees include George Strawbridge, another Dorrance descendant, who has partnered with Third Point to push for changes at Campbell. Collectively, the dissident shareholders own a 8.4 percent stake in the company.

Campbell launched the strategic review after the departure of its CEO, Denise Morrison, in May. Loeb has chastised the company for failing to have a succession plan in place.

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