Campbell Soup Co.’s charter creates high hurdle to sale

Activist investor Daniel S. Loeb, allied with a member of the controlling Dorrance family, went public last week with his campaign to force a sale of Campbell Soup Co., which has faltered in its bid to modernize its portfolio of packaged foods.

But any such deal faces difficult math: The 149-year-old Camden food company's charter, as allowed under New Jersey law, says two-thirds of votes cast by shareholders must favor a sale. A two-thirds vote is also needed to change the charter.

Given that family members represented on the board own 41 percent of the stock, would-be buyers could be out of luck unless the family — descendants of John T. Dorrance, a chemist who invented condensed soup in 1897 — can be convinced to sell.

The brother-and-sister team of Bennett Dorrance, 72, and Mary Alice Malone, 68, billionaires who own a combined 33.1 percent stake, themselves come very close to controlling Campbell outright because the two-thirds rule gives them an almost insurmountable lead.

"For practical purposes, the two of them voting alone could probably stop virtually any sale," said William S. Skinner, who practices corporate law out of the Cherry Hill office of Flaster/Greenberg.

If Bennett Dorrance, who lives in Arizona, and Malone, a Chester County resident, were to disagree on the future of the company and not vote as a bloc, it would be a different matter. Historically, neither has spoken publicly about any intentions.

A third key family member is Archbold D. Van Beuren, who represents a family trust that owns 7.9 percent of Campbell and is believed to be the only great-grandson of John Dorrance to have worked at the company. Van Beuren's mother was among three cousins, grandchildren of Dorrance, who wanted to sell Campbell 30 years ago.

George Strawbridge Jr., the Dorrance descendant working with Loeb, has a 2.8 percent stake but retired from Campbell's board in 2009. It is possible that additional family members own shares, but don't have to disclose them because they are not on the board and their holdings are too small to trigger disclosure requirements.

The current buzz on the future of Campbell Soup, which employs about 1,200 at its headquarters, started in May after Denise Morrison retired abruptly as president and chief executive, following another report in a long run of weak quarterly earnings. The company announced that it would undertake a complete review of its businesses, which includes the newly acquired Snyder's-Lance Inc. snack maker.

"Everything is on the table. There are no sacred cows," Keith R. McLoughlin, a member of the board named interim CEO, told analysts on May 18.

Campbell has said it will disclose the results of the review on Aug. 30 and is not commenting on "rumor and speculation."

Loeb's Third Point LLC, a New York investment firm, disclosed Thursday that it had acquired a 5.6 percent state in Campbell for $686 million. "The only justifiable outcome of the strategic review" is the sale of Campbell, the filing said.

Some have speculated that Kraft Heinz Co., a food giant with its own growth troubles, was in the hunt for Campbell. Food analysts were skeptical in June when the first suggestions emerged that Kraft Heinz might want to acquire the company. Campbell would not fulfill Kraft Heinz's needs: growth in the U.S. and strong platforms for overseas expansion.

Campbell has been here before, surrounded by talk that the family would sell.

The April 1989 death of John T. "Jack" Dorrance Jr., the only son of the chemist who devised the recipe for condensed soup and chairman of the company for more than 20 years until 1984, brought more than speculation. At the time, the family holdings totaled nearly 60 percent.

Eight months after Jack Dorrance's death, three of his nieces, granddaughters of the elder Dorrance who together owned a combined 16 percent of Campbell shares, called for the sale of the company. The period was chronicled in a three-part Inquirer series in 1991.

The board, which included outsiders, in early 1990 backed Jack Dorrance's three children, Malone, Bennett Dorrance, and John T. "Ippy" Dorrance III, who owned a combined 31.8 percent of the company and did not want to sell. Joining them in favor of keeping the company was cousin George Strawbridge Jr., who held 2.1 percent of the stock.

A few years later, Ippy Dorrance, the oldest of the three, moved to Ireland and sold his shares, but the percentage stakes of his siblings have increased thanks to share buybacks that have reduced the number of shares outstanding.

Campbell's fortunes soared in the 1990s as new chief executive David Johnson slashed expenses, sold off weak parts of the business, and raised prices to boost profits. The stock price followed, reaching a peak in the late 1990s that was not surpassed until 2016.

His successor, Dale F. Morrison — no relation to Denise — took over in 1997. He faced a period of turmoil, including the ill-fated spin-off of Vlasic Foods International Inc. in a bid to focus on more promising brands, and a run of bad earnings reports as soup sales fell. Morrison resigned abruptly in early 2000.

Some analysts expected the Dorrances, who at the time held 54 percent of Campbell's shares, to realize that the soup business's prospects were not so hot and decide to sell. Again they held on, though some members of the family trust reduced their holdings over the years. In 2016 and 2017, when the stock was worth around $60 a share, the trust reported sales of 487,283 shares for nearly $30 million.

It is too soon to say what will happen this time, especially given the growth troubles of most big food companies.

Longtime Campbell Soup analyst Mitchell B. Pinheiro doubts the family will unload the company. If nothing else, selling now would be an extraordinarily rapid turnaround so soon after the board approved the purchase of Snyder's-Lance for $6.1 billion, including debt. That deal was completed in late March.

"Why this time? Campbell's has always had a struggle of some form or another," he said. Anything the company does is less profitable than its declining condensed soup business. But, that's been true for decades.

Campbell shares, which closed Thursday at $42.28, are sharply off from their all-time high of $67.10 in July 2016, but on takeover speculation, they've rebounded from a recent low of $33.28 in late May.

Whatever the share price, the company's dividend likely remains solid, Pinheiro said. It's a huge source of income to family stockholders. For Malone, Campbell's largest shareholder, dividends work out to $204,329 a day.