Third Point LLC CEO Dan Loeb is publicly pushing Campbell Soup Co. to sell itself but the activist investor may have to force the issue if the $12.7 billion company balks at finding a merger partner.
In a regulatory filing Aug. 9, Third Point said that given Campbell's "significant obstacles" the best option for the Camden, N.J.-based packaged goods company is a sale to a strategic buyer. Previous reports have suggested that Kraft Heinz Foods Co. LP and General Mills Inc. are potential buyers. Those companies are still in the mix, according to a person familiar with the situation.
"Today, the stock trades at roughly the same price it did in 1996 and the Issuer carries a debt load of more than 5x its EBITDA, which provides limited room to maneuver in the face of deteriorating operational and financial results," Third Point said in its filing.
The activist investor is waiting to see what comes out of a strategic review that the company began when CEO Denise Morrison left suddenly on May 18, according to a person familiar with the firm's plans. The source also noted that if the strategic review were done correctly, Loeb might be satisfied with an outcome other than a sale.
If the company refuses to put itself up for sale, or fashion a new strategy for growth, Third Point and George Strawbridge, a member of Campbell's founding Dorrance family, could nominate their own slate of directors and launch a proxy fight.
Loeb is "probably very serious" about trying to get Campbell to sell itself, said an investor adviser who is not involved the Campbell matter. "He understands the space," this person added, referring to Loeb's recent critique of Nestle SA.
In a July letter to the Swiss food and beverages company, Loeb said it was not moving fast enough to get out of underperforming, non-strategic businesses. Specifically, Loeb said Nestle should unload is its 23% stake in French personal care company L'Oréal.
Tough fight ahead?
The activist may face difficult hurdles if he decides to launch a proxy fight. Dorrance family heirs own about 40% of the company, according to Campbell's website. Two of the founder's descendants serve on the board and have reportedly opposed a sale of the company: Mary Alice Malone, who has a 17.7% stake, and Bennett Dorrance, with a 15.4% stake.
Third Point holds a 5.65% stake in Campbell's and Strawbridge has a 2.8% stake, according to his regulatory filing.
Campbell's responded to Third Point's filing with a statement affirming that its strategic review is ongoing and noting that it would share the results at the same time as it reported earnings on Aug. 30.
If the strategic review ends without a plan that satisfies Loeb, he will have little time to act. Nominations for the board must be received no earlier than Aug. 17 and no later than Sept. 16, according to Campbell's by-laws. Campbell's annual meeting is scheduled for Nov. 14, said a company spokesman, who declined to comment further.
In his regulatory filing, Strawbridge said that the board had refused to "engage in meaningful conversation" with him and that it had taken "no meaningful remedial action."
Representatives of Third Point and Strawbridge declined to comment beyond the regulatory filings.
Campbell's stock closed up 0.71% at $42.28 on Aug. 9 after the news of Third Point's involvement broke. The stock is down nearly 21% over the past year.