Third Point noted Campbell Soup’s profit has been damaged for years by its board of directors’ “permitted management missteps, dismal operating performance, and a series of ill-advised acquisitions,” although the company’s on-going strategic review could still create “significant value” for its shareholders if conducted properly.
Campbell Soup acquired Snyder’s-Lance for $4.9bn at the end of last year to offset its declining sales, and later formed a new snacks division by merging the Charlotte-based company and Pepperidge Farm.
However, it still reported a $393m loss in Q3 sales this year compared to the same period last year.
“Today, [Campbell Soup’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,” said Third Point.
“This predicament is exacerbated by a lack of leadership at [Campbell Soup] following the abrupt exit of its chief executive officer without a successor in place or even a search process underway,” it added.
Campbell Soup earlier named Keith Mcloughlin as its interim CEO as former leader Denise Morrison decided to retire.
Third Point said: “[We] believe that the only justifiable outcome of the strategic review is for [Campbell Soup] to be sold to a strategic buyer.”
Both Third Point and Strawbridge also suggested they might seek seats within Campbell Soup’s board if the current board’s review does not result in a new direction for the company.
Campbell Soup and Kraft Heinz’s responses
In response to the SEC filings, Campbell Soup reaffirmed its portfolio review to examine all potential paths forward, including selling itself.
It said: “Our entire board of directors remains dedicated to delivering a go-forward strategy that will drive value for all shareholders.
“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 with our shareholders on our plan.”
Kraft Heinz, which reportedly expressed a potential interest in buying Campbell Soup earlier, did not comment on the matter.
However, CEO Bernardo Vierira Hees said recently in company’s Q2 earnings conference that there will be more consolidation in the food industry in mid- or long-term, and Kraft Heinz is not shying away from M&A.
“We are disciplined on price to the value creation equation… We don’t do something to be happy for a quarter and then be regretting for the long-term to be apologizing for the next couple of years,” said Hees.