Feud over Campbell Soup’s future could break up the 149-year old soup company

An increasingly ugly fight for control of Campbell Soup is playing out in courtrooms and boardrooms.
The stakes are high: The result will determine the future of the 149-year-old American company and its iconic brands.
On one side is activist investor Daniel Loeb. On the other is the current board. Both have cited support from members of the company’s founding family, and both say they know what’s best for Campbell Soup (CPB), which has faced a slew of problems including poor sales, an ill-fated acquisition and the abrupt departure of its CEO this year.
Loeb wants the current leadership out, but Campbell’s says Loeb is inexperienced in the world of soup, and that they know how to turn things around.
The battle has been raging for months. But it heated up when Loeb’s hedge fund Third Point, LLC sued the soup company on Thursday, alleging that Campbell’s board members are misleading shareholders. Campbell said it is “vigorously contesting” the lawsuit.
It’s not unusual for proxy battles to get so intense.
“Proxy fights are notoriously unpleasant on both sides,” said Charles Elson, director of the center for corporate governance at the University of Delaware. He added that lawsuits aren’t unusual. “Accusations, litigation, it all happens.”
Scathing letter
The fight began in earnest in September, when Loeb suggested replacing the entire Campbell board.
In a scathing letter to the chairman of the company’s board, he blamed the board for the company’s problems and accused members of “mismanagement, waste, ill-conceived strategy, and inept execution.”
Loeb’s letter came in response to a business plan that fell short of his desire for a full sale. In August, the company said it was selling Campbell Fresh, which includes Bolthouse Farms juices and Campbell’s own refrigerated soups, and its international business. After years of overextending, it said it will focus instead on bolstering its most popular brands and that it hasn’t ruled out a sale.
Since then, both sides have been building up their cases ahead of the annual shareholder meeting scheduled for November 29.
In Thursday’s lawsuit, Third Point claimed that Campbell misled shareholders when it asked them for their proxy vote without offering details on the strategic review. Third Point also called a number of the descendant board members’ qualifications and judgment into question.
Third Point said that the defendants engaged “in a deliberate campaign of misinformation designed to secure their reelection via a misinformed electoral vote.” It is demanding that Campbell correct the alleged misstatements before the annual meeting.
Campbell claims that the new board members recommended by Third Point don’t have the right experience for the job, that the hedge fund has a superficial understanding of the company and that it has failed to present a compelling argument. The company reiterated these points and its confidence in its own plan to move forward in a letter to shareholders on Thursday.
“We are confident in the new strategic direction,” wrote Independent Chairman, Les C. Vinney, “and strongly believe that our plan to improve the focus and financial performance of the company is the best path forward.” He added that he has the support of the family members who sit on the board.
In this case, the odds are against Third Point. Descendants hold about 41% of the company, according to data from Refinitv. “That is an enormous number to overcome,” said Elson. Third Point owns about 7% and shareholder and descendant George Strawbridge Jr. controls nearly 3% for just under 10% altogether, according to Refinitiv.
The hedge fund may be angling to make an agreement ahead of the vote, said Jian Huang, an assistant professor in the department of finance at Towson University.
“I don’t see that Third Point will win this battle,” he said. But “they can probably get two or three board seats out of it.”
Even a few board seats could help, he noted, if Third Point’s ultimate goal is to convince board members to put Campbell up for sale.

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