Campbell Soup reaches deal with Third Point, ending proxy fight
- Campbell Soup reached a deal with Third Point to add two of its nominees to its board, former Blue Buffalo CEO Kurt Schmidt and Comscore President Sarah Hofstetter, the two sides said in a statement.
- Under the terms of the agreement, following Campbell Soup's shareholders meeting on Nov. 29, the CPG giant will increase the size of its board from 12 to 14 members and add two new independent directors from Third Point’s proposed slate. Campbell Soup has agreed to add a third director by May 2019 and will consult with Third Point in picking the new individual.
- Third Point has committed to a 12-month standstill agreement. The hedge fund also will provide input into Campbell Soup’s ongoing CEO search process. In addition, Campbell Soup has invited Third Point to present at two meetings of the board and two meetings with Campbell’s CEO during the next year.
Campbell Soup and Third Point have been engaged in an ongoing battle for months over the future of the company. In the latest settlement, Campbell Soup has dodged the kind of sweeping changes that Dan Loeb, who oversees the hedge fund, first demanded when his firm purchased a 7% stake in the company and called for a replacement of the 12-member board and a sale.
To be sure, he faced an uphill battle as three descendants of the company's founder who, along with another family members not on the board, control about 41% of the company's stock. While Loeb later reduced the number of members he wanted to nominate to five, before cutting that to two, he is by no means going away.
With two members on Campbell Soup's board, input in key decisions — like picking a new CEO — and the ability to speak directly top executives and decisionmakers, Third Point will have a major impact on future of the maker of iconic soups, V8, Prego and Pop Secret. Third Point has agreed to a standstill agreement for a year, giving Campbell Soup and its yet-to-be-named new CEO time to turn around its business before Loeb can launch another proxy battle.
“We are pleased to have reached an agreement with Third Point that is in the best interests of Campbell shareholders, and we look forward to welcoming both Sarah and Kurt to our Board of Directors,” said Keith McLoughlin, interim president and CEO of Campbell Soup. “We will continue to maintain an active and productive dialogue with all of our shareholders, including Third Point, as we execute our strategic plan and build a stronger and more focused company that creates long-term value for shareholders.”
But Third Point will be watching. If Campbell Soup hasn't made progress that suits Loeb, it's possible he could purchase more shares and increase pressure on the company to sell additional assets, split the business or sell itself. It's also possible that another activist could join the fray, turning up the heat on Campbell's Soup.
Campbell Soup said last week that profits in the most recent period declined to $194 million compared to $275 million last year, as the company faced higher costs tied to promotional spending and supply chain expenses. Organic growth, which removed items such as acquisitions and changes in currency, fell 3%.
During its first quarter, Campbell Soup highlighted some of challenges it continues to face, especially in its iconic soup division — but offered fresh evidence that it is on the right track to turn its business around. McLoughlin said Campbell Soup started to see "improved trends" in U.S. soup, a return to sales growth in V8 and "continued solid performance" in Campbell Snacks.
McLoughlin noted that stabilizing soups, which makes up roughly 27% of sales, is the company's top priority. Shareholders also are closely watching how well Campbell Soup integrates its $4.9 billion acquisition of Snyder’s-Lance — the largest purchase in the company's nearly 150-year history. The purchase bulked up the company's presence in snacks, but also saddled it with a large amount of debt.
Campbell Soup is also in the process of selling its international business and fresh operations — ending its failed attempt to pivot toward the produce section through acquisitions such as Bolthouse Farms and Garden Fresh Gourmet.
There are a lot of moving parts and future uncertainty at Campbell Soup, not to mention the underlying shift in consumer tastes that is at the heart of the problems facing part of the company's business. Campbell Soup's first and arguably most important step is naming a new CEO, which is expected to happen this year. But whoever leads the New Jersey company will have a lot to do and not a lot of time to do it before Loeb or another activist pounces.
- Campbell Soup Campbell and Third Point Reach Agreement
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