Just make soup, activist investor tells Campbell
Dan Loeb, who is seeking a complete overhaul of the Campbell Soup board, said the embattled snack maker could fetch as much as $58 per share in a sale and should consider offloading brands such as Pop Secret and Pepperidge Farms Frozen Cakes, as he urges significant changes to help modernise the iconic US company.
The activist investor argued in a new 45-page investor presentation on Monday that Campbell had been mismanaged, missed the shift in consumer preferences towards natural and organic ingredients, and was forced to make major acquisitions to try to catch up, including its “ill-timed” $6bn 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 shareholders in a letter dated September 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,” the letter said.
Loeb also said earnings per share in the most recent quarter were down more than 50%, that the company has no permanent CEO and is “being run temporarily by a board member who has no food or beverage experience”.
A representative for Camden, New Jersey-based Campbell did not respond immediately to requests for comment. The company’s shares closed at $36.63 on Friday, giving it a market valuation of $11bn.
Third Point also sent out a 16page booklet to shareholders aiming to win over retail investors to its cause as it ratcheted up pressure on Campbell.
At the presentation, Loeb continued to advocate 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 board “may have failed to perform in 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 the 3G Capital and Berkshire Hathaway purchase of HJ Heinz in 2013, Heinz’s subsequent purchase of Kraft Foods Group in 2015, and Conagra Brands’s deal for Pinnacle Foods this year.
Campbell needs to focus on growing its soup business rather than “apologising for it”, in addition to cutting costs and modernising its offerings, the presentation showed.
Loeb backs using the proceeds from the sale of certain noncore snacks, to reinvest in other brands or to repay debt. He also argued the company could save about $295m 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.