In advance of its annual shareholder meeting Nov. 29, wide-moat Campbell Soup (CPB) announced it had come to a resolution with activist investor Daniel Loeb and his investment firm Third Point in their months-long proxy battle. As part of the agreement, Campbell will expand the size of its board to 14 members, adding Sarah Hofstetter (president of Comscore) and Kurt Schmidt (former director and CEO of Blue Buffalo) as directors. Further, Third Point will be involved in the selection of the company’s permanent CEO (which is to be announced by the end of the calendar year, following former CEO Denise Morrison’s abrupt decision to step aside in May, although the final decision will remain with the board) and another board member to be added by May 2019 (effectively bringing its base to 15 members).
We view the firm’s decision to put an end to this ordeal favorably. Because Campbell is a controlled company, with the Dorrance family (direct descendants of the man who invented the process by which wet soup is turned into condensed soup) owning about 40% of the outstanding shares and maintaining board representation, we had doubted that Loeb's pursuit would ultimately prove successful (at least to the extent he sought--replacing the entire board with a fresh slate of representation at the outset). However, we also think Campbell has already begun to take proactive steps to right the business (including its decision to sell its fresh and international operations--set to be announced by the end of the fiscal year--and extract excess costs to fund further brand investments), which we believe are prudent. As such, this announcement does little to alter our $45.50 fair value estimate or our Standard stewardship rating for Campbell.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Erin Lash, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.