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James Li
James Li
Articles (638)  | Author's Website |

Dan Loeb Plunges Into Campbell Soup

Activist investor takes 17 million-share stake, calls for sale of company

Third Point LLC founder Daniel Loeb (Trades, Portfolio) disclosed on Tuesday that he established an activist stake in Campbell Soup Co. (NYSE:CPB).

Loeb follows an event-driven, value-oriented investment style and seeks situations in which a catalyst is expected to unlock value for shareholders. The manager invested in 17 million shares of Campbell Soup for $41.77 per share.

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Investor calls for sale of company to strategic buyer

Loeb said in his Schedule 13D filing that Campbell Soup had a “disastrous” fiscal third-quarter, including a 6.8% decline in gross margins as a result of cost inflation, higher supply chain costs and dilutive impacts from acquisitions and higher promotional spending.

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Loeb addressed several management problems, including the lack of CEO succession planning following the retirement of former CEO Denise Morrison on May 18. The manager disclosed in the filing that Campbell Soup is “reviewing all aspects of [the company’s] strategic plans and portfolio composition.” Loeb said that given the “significant obstacles” facing Campbell Soup, one justifiable outcome of the review is for a strategic buyer to acquire the company.

Company has poor financial strength

GuruFocus ranks Campbell Soup’s financial strength a poor 4 out of 10 based on several factors, including high debt ratios and a weak Altman Z-score of 1.40. The company’s debt-to-equity ratio of 7.01 underperforms 92% of global competitors, while the company’s debt-to-EBITDA ratio of 10.10 is significantly higher than Joel Tillinghast’s safe threshold of 4.

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See also

Other gurus with positions in Campbell Soup include Pioneer Investments (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and David Dreman (Trades, Portfolio).

Loeb has not released his second-quarter portfolio update as the deadline is 45 days after quarter-end. Despite this, he disclosed in his June shareholder letter a new position in eBay Inc. (NASDAQ:EBAY) spinoff PayPal Holdings Inc. (NASDAQ:PYPL). The investor’s top five holdings as of the latest portfolio date are Baxter International Inc. (NYSE:BAX), DowDuPont Inc. (NYSE:DWDP), United Technologies Corp. (NYSE:UTX), Alibaba Group Holding Ltd. (NYSE:BABA) and Facebook Inc. (NASDAQ:FB).

Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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