Market Overview

2 Pro Takes On Campbell Soup's Deal With Activist Investor

2 Pro Takes On Campbell Soup's Deal With Activist Investor

Activist investor Dan Loeb and his Third Point struck an agreement Monday with Campbell Soup Company (NYSE: CPB) in which two of Third Point's slate of directors will be added to the food company's board. 

Shares of Campbell Soup moved lower after the announcement, and at least two Wall Street analysts were unenthusiastic. 

The Analyst

Bank of America Merrill Lynch's Bryan Spillane maintains an Underperform rating on Campbell Soup Company with an unchanged $31 price target.

Tigress Financial Partners' Ivan Feinseth commented on the agreement in his daily newsletter.

BofA: Complex Turnaround Remains

Campbell Soup and Third Point's agreement will avoid a proxy battle, and the immediate addition of Sarah Hofstetter and Kurt Schmidt to the company's board will bring a "fresh perspective," Spillane said in a note.

The new board members could help reduce the likelihood of "lapses on strategic direction" and assist with capital allocation strategies, the analyst said.

Monday's agreement brings no meaningful changes in light of Third Point's initial objective of selling the entire company, Spillane said. 

Campbell Soup's turnaround story remains as complex now as it did before the announcement, and a return to consistent growth could take several years, the analyst said. 

The stock is trading at 15.3 times 2019 EPS, which represents a premium to its peer direct packaged food competitors.

BofA's $31 price target is based on a 12.6 times multiple on 2019 EPS, which implies a 20-percent discount to its packaged food peers and is warranted given that the company is at the "starting point" of a multiyear turnaround, according to the sell-side firm. 

Tigress: Sell At Current Levels

Campbell Soup and Third Point's deal essentially eliminates the likelihood of the food company selling itself, Feinseth said in a note. But finding a buyer was unlikely, which makes Loeb's interest in taking a stake in the first place confusing, he said. 

Investors should continue selling Campbell Soup's stock, as it has downside potential toward the low $30s, the analyst said.

The company has many steps to take before it can start generating new value for investors, including the appointment of a new CEO who will be tasked with unlocking "value in a company that in my view has very little intrinsic value to unlock," Feinseth said. 

Price Action

Campbell Soup shares were trading up 0.64 percent at $39.27 at the time of publication Tuesday. 

Related Links:

JPMorgan Loses Its Appetite For Campbell Soup

Kraft Heinz Has Appetite For Campbell's, But JPMorgan Isn't Biting

Photo by Jonn Leffmann/Wikimedia. 

Latest Ratings for CPB

Dec 2019MaintainsMarket Perform
Dec 2019MaintainsUnderperform
Oct 2019Initiates Coverage OnOutperform

View More Analyst Ratings for CPB
View the Latest Analyst Ratings

Posted-In: activist investor Bank of America Merrill Lynch Bryan Spillane Dan LoebAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


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