In a week, shareholders will vote on whether Campbell Soup's board will face its most significant disruption in 64 years as a public company. Activist firm Third Point has been waging a proxy battle against Campbell, demanding that it put five of its nominees on its board.
In this contest for Campbell, it is seemingly no longer a question of whether it will add Third Point nominees but how many.
The number is significant. According to the bylaws, Campbell has 12 board members, with the ability to go to 14, with board approval. (Its bylaws could be amended to boost the board even more.) But the more Third Point nominees it adds, the more control of the boardroom Campbell cedes. That would mark a huge shift for a soup company steeply tied to its tradition of largely being run as a family company. Three of Campbell's heirs sit on its board. The descendant family owns at least 41 percent of the company.
Third Point and its founder, Dan Loeb, which have a roughly 7 percent stake in Campbell, originally wanted to replace the soup company's entire board. Third Point is now aiming to add only five directors, it has said.
If Third Point gains board seats, it doesn't necessarily mean the entire company will get sold. While Third Point originally called for a sale of Campbell, it is unclear there is a buyer at a good price for the entire company.
But Third Point has been urging Campbell to consider a split, a move Campbell said it previously weighed along with a number of other strategic options. Having more influence on the board could make such a move more likely. It may also put pressure on Campbell's owners to act quickly.
Campbell has already offered concessions, publicly stating its offer to add two of Third Point's nominees, as pressure from the investor community has mounted. That's even as Campbell Soup heirs, who hold roughly 41 percent of Campbell, have already pledged their support to the company.
Its recent financial performance is not in its favor. The soup company has delivered 19 percent total shareholder return over the last 20 years, while the S&P 500 has nearly tripled in the same period. Its stock is down 16 percent since January, according to Factset, despite topping analysts' expectations for its quarterly earnings on Tuesday.
Nor is an opinion written by influential shareholder advisory firm ISS. Last week ISS came out in support of all five of Third Point's nominees.
"Given the board's subpar oversight of critical issues such as M&A and succession planning, shareholders may wonder whether the incumbent board is capable of steering Campbell back on track in a timely manner," ISS said.
The advisory firm also raised questions about Campbell's dedication to its dividend despite its poor financial performance.
"Maintaining the dividend may prove to be the right decision, though it raises the question of whether the board, which currently includes three members of the founding family, is truly considering all options," the opinion said.