JPMorgan Loses Its Appetite For Campbell Soup

Activist investor and major Campbell Soup Company (NYSE: CPB) shareholder Dan Loeb is pushing the soup company to sell itself, but this is an unlikely outcome, according to JPMorgan.

The Analyst

JPMorgan's Ken Goldman downgraded Campbell Soup from Neutral to Underweight with an unchanged $36 price target.

The Thesis

Loeb's Third Point and company heir George Strawbridge own a combined 8.4 percent of Campbell Soup and said in a regulatory filing the company needs to find a strategic buyer, Goldman said in the downgrade note. (See the analyst's track record here.)

Multiple factors make a sale unlikely at this point, the analyst said. 

The Campbell board is stacked with larger shareholders including Mary Alice Malone and Bennett Dorrance, who combine for 33.1 percent of total ownership, Goldman said. There are no indications the two executives are interested in a sale, which can be shot down if 33.3 percent of votes reject a deal, he said. 

The appeal of Campbell Soup is "limited" even to industry titans like Kraft Heinz Co (NASDAQ: KHC), Goldman said. 

Kraft could acquire the soup company, which would be 21-percent acrretive to EPS, but the risks associated with buying the struggling company make it debatable if 21 percent is a high enough figure, the analyst said. 

Fellow activist investor Carl Icahn reportedly considered an investment in Campbell, but walked away from a deal given that the family structure ownership makes it difficult to enact substantial changes, according to JPMorgan. 

Price Action

Shares of Campbell Soup Company were trading lower by 2.2 percent to $41.35 at the time of publication Friday. 

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