Activist investor Third Point LLC is pushing for a sale of Campbell Soup Co. The management firm, headed by Daniel Loeb, recently acquired a 5.65 percent interest in the Camden, NJ based firm for $686.4 million. Joining the effort is Campbell shareholder (and former board member) George Strawbridge Jr., the grandson of the inventor of Campbell condensed soup, who has a 2.8 percent stake. Third Point said it signed an agreement with Strawbridge to coordinate their efforts with a 8.42 percent stake in the company.
In an SEC filing earlier this month, Third Point noted that Campbell’s profit has been damaged for years by its board of directors’ “permitted management missteps, dismal operating performance and series of ill-advised acquisitions.”
In response to the filings, Campbell said: “Our entire board of directors remains dedicated to delivering a go-forward strategy that will drive value for all shareholders.”
To that end, CNBC reported that Campbell’s has engaged investment firm Goldman Sachs to investigate the possibility of selling off some of its businesses to help pay down growing debt that was created by the company’s acquisition of Snyder’s-Lance earlier this year.
As consumers’ tastes have changed and the demand for processed foods has declined in favor of more fresh options, Campbell’s core soup sales have suffered over the past several years. After the Snyder’s-Lance deal, the company formed a new snack division by merging the Charlotte, NC based company with its Pepperidge Farm division. However, it still reported a loss of $3.3 million in third quarter sales, compared to the same period the year before.
In its SEC filing Third Point said, “Today (Campbell’s) stock trades at roughly the same price it did in 1996 and the company carries a debt load of more than five times its EBITDA, which provides limited room to maneuver in the face of deteriorating operational and financial results.”
At presstime on August 15, Campbell’s shares were trading at $42.29.
In May, Campbell’s said it would launch a “thorough and critical” review of its operations and holdings after it disclosed the “unacceptable” third quarter earnings and the unexpected retirement of long-time CEO Denise Morrison.
In late Campbell’s hired management consulting firm Deloitte to lay the groundwork of a competitive landscape analysis to help the company determine whether the review’s conclusion should entail selling the company, or if it can solve its problems internally. Deloitte’s examination is expected to be concluded before Campbell’s next earnings report, according to published reports. In an announcement, Campbell’s said, “We look forward to sharing the details of our plans when the company reports its fourth quarter and full year results on August 30 and engaging our shareholders with our plan.”
However, Third Point believes the only reasonable outcome of the review will be to find a strategic buyer for the company. Additionally, the investor said it may take other steps to enhance value, including attempting to secure a controlling stake in the company or exploring a potential merger. Both Third Point and Strawbridge also suggested a potential interest in seeking seats on the Campbell board.