Dan Loeb Sees 50% Upside for Campbell Soup

Loeb wants to find a buyer if he can replace board

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Oct 02, 2018
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Daniel Loeb (Trades, Portfolio) Monday expanded his campaign to persuade Campbell Soup (CPB, Financial) shareholders to vote for his slate of directors to make drastic changes at the company or explore a sale.

In a new presentation, Loeb’s hedge fund Third Point estimated the company could attract $52 to $58 per share from a buyer. That price reflects a premium of around 50% from the food giant’s opening price Monday of $36.82.

Shares of Campbell Soup closed at $36.34 Monday, down 0.79% for the day and 22.2% year to date.

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Loeb’s “attractive new slate of highly qualified nominees” would completely replace the company’s current board. Their turnaround plan would split the company in two segments: grocery and snacks. In grocery, the plan would aim to grow the soup business, improve cost management to stem margin declines, modernize product offerings and improve retailer relationships.

The key goals in the snacks business are to innovate and grow core brands, capture more savings in its Snyder’s-Lance acquisition, sell non-core brands like Pop Secret and Pepperidge Farm, and simplify routes to market.

The investor accused the company’s board of mismanagement including losing market share, allowing earnings to decline and ramping up leverage.

Campbell Soup has seen slow growth with deteriorating bottom line in recent years. It has a 1.6% rate of revenue increase and an 11.6% rate of earnings decline over the past five years. It also has significant debt, with a debt-Ebitda ratio of 11.41, higher than 90% of the companies in its global packaged foods industry.

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Loeb’s Third Point holds roughly 6% of Campbell’s shares outstanding. In addition to Campbell, he is working on activist investments at Nestle (OTCPK:NSRGY, Financial) and United Technologies (UTX, Financial). His firm has recorded returns of 18% annualized since inception in 1995, versus 8% for the S&P 500.

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Loeb first disclosed his activist stake in Campbell Soup on Aug. 9. The company completed a strategic review on Aug. 30 that resulted in plans to divest assets, reduce debt and cut costs. Loeb then introduced his slate of board candidates on Sept. 7. Campbell Soup responded with a statement saying it would add the nominees to its proxy materials and await a shareholder vote at its annual meeting.