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  • KPB & Co Research


As consumer package goods companies continue to reel from slower demand, changes in the food retail landscape, and inventory de-stocking industry wide, Campbell Soup became a hot zone for activist investor activity. With the sudden resignation of the CEO, and the rapid decline in the stock price down to the mid US$30s, talk of a possible merger with Kraft Heinz Co surfaced.

the rationale Behind a deal

Kraft Heinz with its strong free cashflows and solid brands would be one company that could stomach the volatility in the business as the industry transitions. However, merger talks subsided and word on the street now is that Kraft Heinz is no longer interested due to valuation disagreements. Activist investors, spearheaded by Dan Loeb, took a 8.42% stake in Campbell Soup with the intention to push for a sale. See Third Point's investor presentation below. 


In our view, Third Point Advisors - Dan Loeb's fund - will find it difficult to present a compelling argument for a sale. Campbell Soup already has a strong brand, and is generating solid free cashflows even with the decline in business. As such management has some wiggle room to make changes. Additionally, there is the argument that the company can ride out cyclical changes in the industry, and would therefore see better days in the future. Finally, family and close associates of the founder of the company - John Dorrance - own 41% of the company and would likely hold sway over any decision to sell.​

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