IN THE SOUP WITH THIRD POINT: Campbell’s Hedge Fund

As we’ve discussed previously in these posts, Campbell Soup Company has been saddled with a hedge fund that seeks to have it travel the same path that other hedge funds achieved with Toys “R” Us and Sears, before them, essentially closing them down.

The latest word on the street, so-to-speak, is that, for now, Campbell’s might have gained the upper hand.  And, it’s just possible that they’ll use that advantage to put things in a better position to be out of harm’s way from the hedge funds of the world.  I’m told that Campbell’s leadership has learned their lesson from this experience and plans to do just that.  When we last talked in some detail about Campbell’s, the hedge fund Third Point, owned by Daniel Loeb, was making a serious attempt to oust many of the sitting board members at Campbell’s and replace them with choices of their own.  To date, they’ve succeeded in placing only two of their choices on the Campbell’s board – Comscore President Sarah Hofstetter and Kurt Schmidt, former CEO of Blue Buffalo.  So a pet food company representative and a “third party source for reliable measurement of cross-platform audiences” have been added to the board’s membership  The deal was struck when Loeb realized it wasn’t even a close possibility for his winning in a shareholder vote.  Loeb and his hedge fund were stymied by a block of four heirs of the Campbell Soup fortune who hold three board seats and, with other family members, own 41 percent of the company’s stock.  It is of interest that the all-out fight by the hedge fund to acquire control of the board – something that has been a successful ploy of activists in other situations – was stopped, in this instance, by the fact that the company is heavily family-owned.  And, Campbell’s leverage in the fight was advanced further by the recent better-than-expected earnings report.  One member of the Campbell family, George Strawbridge, joined the opposition in trying to take the company down.  Strawdbridge, a “sour grapes” poster child, was forced to resign form the Campbell board in 2009 because of the age limits in effect.  The stalking horse that Strawbridge and Third Point used to go after Campbell’s leadership was that the board had not been able to stop declining sales, and had failed in its bet on fresh foods and a resulting acquisition that left the company in debt.  The fresh foods push had been instigated by then-CEO Denise Morrison, who was asked to resign in May of this year.  The board developed a plan that would re-focus the company on snacks and soup going forward.  It was at this point that Third Point attempted to step in and take over the board in order to “turn around the business.”  I’m always astounded to see those who have no expertise in running large corporations declare their candidacy for “turning the business around.”  Talk about irony.  But it was that same brand of bluff and bluster that brought down Toys “R” Us and Sears – so it’s definitely something that, although ludicrous on its face, is to be taken very seriously by those who wish to maintain their businesses.

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