Soup War Cools Off

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What's going on?

They say that too many cooks spoil the broth. On Monday, after two months of fighting, Campbell Soup reached a deal with a rogue shareholder but its stock reduced 3%.

What does this mean?

Third Point, an activist investor (one which owns a sizable chunk of a company and uses it to exert influence) with a 7% stake in Campbell Soup, started stirring the pot back in September, initially seeking to oust the companys entire board. Third Point thought Campbells chefs were doing a poor job running things: at the time, the stock price had lost around 30% of its value since 2016.

But the dispute has now come off the boil. Campbells board will remain in place, with the addition of two members selected by Third Point and the activist investor will also get a say in choosing Campbells new CEO.

Why should I care?

For markets: Blowing hot and cold.

Campbells has been badly in the soup for a while now. Along with other consumer staples companies (that sell things people need rather than want), Campbells has been struggling to raise prices even as its spent big on adding new product lines. The canned soup company is also battling health trends: as consumers seek out fresh food, Campbells cream of mushroom is being left on the shelf. Investors selling the stock on Monday may have been hoping that Third Point would win a bit more power.

The bigger picture: Sometimes an activist win is a win for all investors.

As activists demands are typically aimed at raising share prices, when they get their way it can be a win all round. After UK hotel and restaurant owner Whitbread was pushed to sell Costa Coffee to Coca-Cola in September, its shares shot up. And Nestl is currently being pressured by none other than Third Point to spin off underperforming parts of its own business, trimming the fat to improve growth.

Originally posted as part of the Finimize daily email.

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