Breakingviews: Campbell lukewarm sale pitch is begging for a cook

Campbell Soup’s lukewarm sales pitch is begging for a real cook. The $12 billion canned food and snack company is trying to sell its fresh and international brands while stepping up cost cuts on its stagnant core business. It is leaving the door open for a sale, but that’s unlikely to appease activists like Third Point’s Dan Loeb.

The New Jersey-based prepared foods outfit has had a difficult run. Chief Executive Denise Morrison quit abruptly in May after leading a string of questionable acquisitions, and the company launched a strategic review under an interim CEO. Meanwhile its main businesses are suffering. The company on Thursday reported that sales in the division holding Campbell’s Soup and V8 juice declined 1 percent year-over-year in the quarter ended July 29. It also tempered expectations for the coming year.

To help appease investors, the company plans to offload businesses like Kelsen cookies in China and Bolthouse Farms beverages and carrots. Morrison saw them as vehicles for reviving growth but the company hasn’t been able to integrate them well. A sharper focus on core operations should drum up an additional $150 million in annual savings by the end of 2022.

Yet Campbell is proceeding without a long-term head chef in the corporate kitchen. The company is conducting a CEO search and interim chief Keith McLoughlin told analysts he is not a candidate. Loeb, who has agitated for a sale of the company, has other hedge funds he could bring on his side for a possible proxy battle, including Schonfeld, Litespeed Management, and Och-Ziff Management.

The board is exposed. Some members, including three family insiders that together control roughly 40 percent of shares, approved some of the acquisitions the company is now unwinding. Drumming up a bidder won’t be easy. Kraft Heinz is the most logical buyer, but on Thursday Warren Buffett, whose Berkshire Hathaway is the largest Kraft shareholder, told CNBC that it would be “very hard” for anyone to justify paying a significant premium.

Still, a full auction process should flush out bidders and allow shareholders to decide if they want to sell their stock in the face of turmoil. Campbell’s current stale recipe makes that look like the best option.

_______________________________________________________________________

Request a free trial of Breakingviews here.