Campbell Soup to sell international business after review

Campbell Soup said on Thursday it plans to sell its international and fresh refrigerated-foods units and left open the possibility of putting the whole company up for sale, following a months-long review and pressure from hedge fund investors.

It is not clear if the plan will appease activist investor Dan Loeb, whose Third Point hedge fund announced a 5.65 per cent stake on August 9th and immediately pressed for a sale of the entire company to a competitor as "the only justifiable outcome".

Historically, the company has resisted big changes, being effectively controlled by the heirs of John Dorrance, the chemist who invented condensed soup and went on to run the company a century ago.

Dorrance’s grandchildren Mary Alice Malone, who raises horses in Pennsylvania, and her brother Bennett Dorrance, a real estate developer in Arizona, between them control 33 per cent of Campbell’s shares. They have fended off periodic calls over three decades for the company to sell itself.

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Slate of directors

Another grandchild, John Dorrance III, is one of Ireland’s richest men. Mr Dorrance sold his shares in the business in the 1990s.

Mr Loeb could escalate his attack and nominate a slate of directors within the next few weeks to be voted on at Campbell’s annual meeting later this year, sources familiar with the matter told Reuters this week.

The board kept alive the possibility of an outright sale, saying it “remains open and committed to evaluating all strategic options to enhance value in the future”.

Shares of Campbell, which has a market value of about $12 billion, fell 4 per cent in pre-market trading.

Adjusted earnings

Alongside the results of its review, which was started in May, Campbell forecast adjusted earnings per share of between $2.45 and $2.53 for fiscal 2019, below Wall Street’s average estimate of $2.69.

The 149-year-old company has been struggling to rein in costs and attract young consumers to its namesake soups and Pepperidge Farm cookies. Its shares have fallen by a third over the past two years.

On Thursday, it said it was increasing its cost savings target by $150 million to $945 million by the end of fiscal 2022.

Retreating from smaller international and fresh-food businesses marks a change from the strategy of former chief executive Denise Morrison, who wanted Campbell to have a diverse portfolio with a focus on health and well-being.

Ms Morrison stepped down abruptly in May after a string of poor results. On the same day, the company announced a sweeping review of its portfolio and board member Keith McLoughlin was named interim CEO.

The proposed unit sales may make Campbell a more attractive takeover target as it turns its focus back to its core soup and salty snacks businesses, the pillars of the company.

The two businesses put up for sale currently bring in about $2.1 billion in annual sales, about a quarter of Campbell’s overall revenue. – Reuters