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Third Point 'Demands' Campbell Soup Board Records

By Donna Ahern
Third Point 'Demands' Campbell Soup Board Records

Activist investor Daniel Loeb's hedge fund Third Point LLC has demanded access to a trove of records from Campbell Soup Co, ranging from board meeting minutes to financial documents, as it ratchets up a campaign to replace the company's board of directors, according to a letter seen by Reuters.

Third Point's move offers an example of the legal tools shareholder activists are increasingly using to boost their chances of winning proxy contests against corporate boards.

Such manoeuvring could prove crucial in this case, given Third Point, which owns 5.65% of the canned soup maker, faces challenges in wooing some key shareholders. Descendants of former Campbell Soup Chairman John Dorrance own a combined 42% stake in the company, representing a major hurdle.

Third Point gave the U.S. company five days to provide it access to several, typically confidential, documents, pertaining to its recently completed strategic review, its mergers and acquisitions activity, and succession planning for its chief executive, according to Third Point's "demand letter," dated and delivered to Campbell Soup on Wednesday.

In the letter, the hedge fund cites a New Jersey statute that gives shareholders the right to review company documents, provided they demonstrate a "proper purpose" for looking at the records. This sets the stage for a legal battle with Campbell Soup, should it refuse access to the records.


Campbell Soup, based in Camden, New Jersey, did not respond to a request for comment on how it would respond to Third Point's demands.

In a press release it published on Thursday to urge shareholders to back its board, the company said that it "strongly objects to Third Point’s aggressive and short-sighted tactics".

Third Point declined to comment.

Campbell Soup shares were up 1.2% at $36.94 in early morning trading in New York on Thursday, giving the company a market capitalization of $11.1 billion.

Last month, Third Point unveiled a slate of nominees to replace all twelve of Campbell's directors, alleging the company has been mismanaged for years. The company's share price is now 30% lower than it was 20 years ago, Loeb said, adding that executives failed to explore all strategic options, including the sale of the company.


Campbell has disputed this, arguing that its recently concluded strategic review considered every possibility.

The company has said it currently plans to sell only its international and fresh refrigerated-foods units, as it focuses on improving its operational performance.

The Wall Street Journal reported on Thursday that Jeff Dunn, the former president of Campbell's fresh food unit, is leading a consortium of investors that is in talks to buy that division for between $500 million and $700 million.

Decisions On Acquisitions

Third Point said it needs to see Campbell documents to determine whether board directors or employees violated their fiduciary duty. In its letter, Third Point seized on comments made last month by Campbell's interim CEO, Keith McLoughlin.

McLoughlin, who took over when CEO Denise Morrison exited


abruptly in May, had said the firm relied too much on acquisitions and lacked a culture of accountability, that led to poor execution.

"These admissions demonstrate that shareholders are entitled to the records of the company's decision-making processes to investigate this unquestionable mismanagement and further instances of wrongdoing," according to Third Point's letter.

Among the things Loeb wants to find out is how the company went from saying that its $6 billion acquisition of Snyder's-Lance would be accretive to earnings only to reverse itself and say it would be modestly dilutive to earnings.

"It is unfathomable that Campbell management could improperly represent to shareholders that the largest acquisition in the company's history would be accretive and just five months later admit that they blew it," the letter said.

Third Point is also asking for details about what the board planned to do after Morrison stepped down, including hiring a headhunter and any information on potential CEO candidates.


"Given Ms Morrison's disastrous performance, the board should have been acutely focused on trying to identify a qualified replacement well before her separation," the letter said.

Campbell, which revolutionized the home-cooking industry with easy-to-prepare soups and low-cost production techniques, has been struggling to attract young consumers to its namesake soups and Pepperidge Farm cookies.

It is not clear if any company would buy Campbell in its entirety. Kraft Heinz Co has considered an acquisition of Campbell in the past, sources have told Reuters, but there is no sign of any recent approach from the company.

Pledged Shares

Third Point's records request also covers any information related to board director Bennett Dorrance, who has held his seat since 1989 and was granted a waiver to stay after reaching the mandatory retirement age of 72.

Third Point is interested in finding out why Dorrance, a grandson of former company chief John Dorrance, has not moved more quickly to reduce the loans he took for which he pledged roughly $500 million of his Campbell shares as collateral.

Pledging or loaning out shares creates questions about whether the shares can be voted and if "directors' interests are truly aligned with those of shareholders," the letter said.

Campbell said on Thursday it will hold its annual shareholder meeting, where investors will vote on the board directors, on Nov. 29. It is not clear whether any legal dispute over Third Point's demand for company documents would be resolved by then.

Investors who hold Campbell shares as of 9 Oct will be eligible to vote at the shareholder meeting, the company said.

News by Reuters, edited by Checkout, additional reporting by Donna Ahern. Click subscribe to sign up for the Checkout print edition.

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