Third Point wants Campbell to explore a split
Loeb’s plan for company, if he wins proxy fight, is to decide on a split within 100 days
Third Point LLC’s initial plan to revamp Campbell Soup Co. includes exploring a breakup of the company as one of its central tenets.
Daniel Loeb’s activist hedge fund is waging an uphill battle in a proxy fight to replace Campbell’s entire 12-person board. If it wins the board, Third Point believes the company should decide within 100 days whether to break up into two major units, one focused on meals and beverages and the other focused on snacks, according to a presentation released by Third Point on Tuesday detailing its plan.
The Wall Street Journal first reported Third Point’s plans on Monday.
Third Point, which has said the only justifiable option under the current board is a full sale of the company, believes a split would make the company more attractive to investors and potential buyers down the line, according to people familiar with the plans. Earlier this month it mentioned a split as one of many ideas its slate would consider.
Campbell has been hit by falling soup sales, a botched expansion into fresh foods and a sharply higher debt load because of its Snyder’s-Lance snacks acquisition. Campbell’s stock price has been battered, down roughly 22% this year.
In August it announced a plan to sell its fresh-foods and international units and focus on North American meals, beverages and snacks. Interim Chief Executive Keith McLoughlin, who replaced former CEO Denise Morrison after her abrupt departure in May, said at the time the company had considered a range of options including a full sale or splitting itself in two. In a statement Tuesday, Campbell said Third Point doesn’t understand the food industry. A split, for instance, creates more costs and is riskier, the company says.
Third Point also wants the company to focus on revamp- ing its soup business, consider selling noncore assets such as Pepperidge Farm frozen cakes, and buy smaller, healthier snack brands, according to the plans.
Third Point believes Campbell is overlooking the potential to revive its soup business and thinks Campbell’s soup business could benefit by adapting Conagra Brands Inc.’s frozenfoods playbook, which involved modernizing packaging, flavors and ingredients.
People familiar with the company’s plans say frozen foods aren’t the same as soup and deny it has shifted its focus from its soups. Campbell has said its plans for stabilizing its U.S. soup business include targeting consumers in their late 30s to mid-50s and focusing on convenience, affordability and taste for its namesake brands; it also plans on growing its largely organic Pacific brand and improving cash flow and margins for other brands.
Third Point supports company initiatives already under way to cut costs and streamline its snack distribution network, the people said, but believes they could be better executed under new leadership.
Third Point and Campbell heir George Strawbridge Jr. have teamed up and together own roughly 10% of Campbell’s stock. They are stacked up against other Campbell heirs who own roughly 41% of the company, three of whom are current directors, and who plan to support the incumbent board at a shareholder vote scheduled for Nov. 29.
Campbell Chairman Les Vinney criticized Third Point last week for lacking a cogent plan or new ideas and said Third Point’s only goal is to sell the company.
Campbell has said it plans to revitalize the company by investing the proceeds from the planned sales to pay down debt, which ballooned after a recent acquisition of snack-maker Snyder’s-Lance, cut costs and improve operations. Campbell has also said it expects to name a new CEO by the end of the year.
Third Point has said the company should refrain from appointing a new CEO until after the vote. It notes in its presentation that one of its nominees, former Hostess Brands Inc. CEO Bill Toler, is ready to replace Mr. McLoughlin as interim CEO.
Third Point on Friday sued Campbell and its board, alleging the food maker distributed misleading and incomplete information to win shareholders’ support in the proxy fight.
A New Jersey judge is expected to issue a ruling Friday on whether Third Point can move forward with discovery.