Hedge funds play an important role in keeping managements lead and focused and for Campbell Soup, Daniel Loeb’s fund Third Point LLC is leading the fight against the present board. Mr. Loeb believes the board either did not understand their job or did nothing as Campbell Soup made a number of acquisitions and saw $7 billion in shareholder value disappear (the stock is now 20% lower than it was 20 years ago.)
In an article by Svea Herbst-Bayliss of Reuters, while the existing board has stated reforms and lowering debt are keys for the future. Mr. Loeb is nominating 12 people to the board because it is a mess. The new people would throw out the existing board. The problem for Mr. Loeb while his nominations would include a grandchild of the founder of the company – John Dorrance, the present board has two grandchildren and a great grand child on the board. The family of Dorrance owns roughly 41% of the shares and all they need is 50% plus one.
Linking to dividend paying stocks, when the general market goes up and the shares of older established companies go down, unless there is some very good reason, hedge fund buyers will want to change management and boards. There will be many reasons for the decline in shares although you will still see Campbell Soup on the grocery shelf. If you love the food, perhaps it is better to wait until after the proxy fight is over before buying shares. One way or another, the company’s will be in a restructuring mode and it may be a good idea to put the stock on your watch list to see what they do.
There are more questions than answers, till the next time – to raising questions.