Campbell may face proxy war after sale of international unit

Campbell Soup Co. is divesting its international operations and fresh-food unit, falling short of expectations for a sale of the entire company.

Despite pressure from activist investor Dan Loeb to find a buyer amid a threeyear sales slump and a sliding stock price, the struggling packaged-food maker will pursue a turnaround plan to ignite soup and snack growth in its key U.S. market, according to a statement Thursday. Campbell is also boosting its cost-cutting target as it tries to slim down. The shares dropped as much 4.5 percent on Thursday, the most in three months.

The company’s board, which has been reviewing operations since the abrupt departure of Chief Executive Officer Denise Morrison in May, plans to use the proceeds from the sales of brands including Bolthouse Farms and Arnott’s, an Australian snack food company, to pay down debt. The businesses up for sale generated about $2.1 billion in net sales in fiscal 2018, according to the company.

Loeb has criticized the board’s “abysmal oversight” and argued the company should find a strategic buyer. Third Point, the hedge fund he runs, started building up its stake in Campbell after Morrison’s departure. It said in a regulatory filing earlier this month that it had partnered with fellow investor George Strawbridge to push for a sale of the com- pany. They collectively hold about 8.4 percent of the soup maker.

Third Point declined to comment. Strawbridge didn’t reply to a request for comment.

Campbell’s ownership structure has historically made it a tricky target. About 41 percent of the shares are held by descendants of John Dorrance, a longtime company executive in the early 20th century who is credited with inventing condensed soup.

The board considered a sale of the entire company during the recent review, according to the statement, but decided instead to refocus on its North American operations while also shedding assets. This could make Campbell more appealing in the longer term, said Ken Shea, an analyst with Bloomberg Intelligence.

“By simplifying it, and being more focused, it makes it more attractive to a suitor down the road,” he said.

In the company statement, interim CEO Keith McLoughlin said the board is open to evaluating “all strategic options to enhance value in the future.”

The shares fell 2.9 percent to $38.85 at 9:35 a.m. in New York. The stock had lost 17 percent of its value this year through Wednesday. Campbell shares were at $39.17 at 11:10 a.m.

In addition to announcing the potential asset sales, Campbell also released quarterly earnings Thursday. The company said adjusted profit will be $2.45 to $2.53 per share in fiscal 2019, missing the average estimate of $2.67.

Campbell has struggled with declining sales in recent years as consumers seeking out less-processed products turn away from its namesake soup. A push to add healthier brands to its portfolio with the acquisition of Bolthouse Farms had been hampered by operational issues. Now, that unit is up for sale.

The focus for the company going forward will be soup and snacks in North America. Late in 2017, the company announced it was buying potato chip and pretzel maker Snyder’s-Lance for about $4.9 billion in a bid to find growth in salty snacks. In addition to its soup unit, Campbell has a snack division that makes Goldfish and Pepperidge Farm cookies.

Loeb said in the filing earlier this month that Third Point had held conversations with McLoughlin, who took over on an interim basis after Morrison departed. Based on the talks, and subsequent statements from the company, Loeb said he believed a sale was being considered. And given the obstacles the company faces, “the only justifiable outcome of the strategic review is for the issuer to be sold to a strategic buyer,” he said.

Loeb said in the filing that the board of directors had “permitted management missteps, dismal operating performance, and a series of ill-advised acquisitions to take an irreversible toll.”