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A Family Feud Threatens Campbell's Dynasty

The Wall Street Journal. logo The Wall Street Journal. 11/23/2018
a can of soda© J. David Ake/ASSOCIATED PRESS

Two years ago, as Campbell Soup Co. sales tanked, a grandson of the soup’s inventor called his cousin to complain about the direction of the 150-year-old company, which still paid welcome dividends to family members.

From his sprawling Pennsylvania horse farm, George Strawbridge Jr. told Mary Alice Malone, a billionaire with her own farm about 5 miles away, that he had lost faith in Campbell’s chief executive at the time.

Ms. Malone, Campbell’s single biggest stockholder and a member of the board since 1990, thanked her cousin for the call. They haven’t spoken since.

Family feuds often sprout from criticism and hurt feelings. But few carry the consequences of the split among descendants of John T. Dorrance, the chemist who made the family fortune by inventing condensed soup sold in cans.

The two cousins are now on opposite sides of a battle over the future of the company, where long-simmering family tensions have reached a boil.

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Mr. Strawbridge and his son, with no allies on the board, hunted for one outside the company. They found Daniel Loeb’s activist hedge fund, Third Point LLC, which now seeks to oust five Campbell directors and install its own—with an eye to a possible sale or split of the company. Together, they own about 10% of the stock.

Ms. Malone, her brother Bennett Dorrance, also a billionaire, and their cousin’s son, Archbold van Beuren, all board members, are supporting management and seek to maintain the family’s longstanding influence. They collectively control about 37% of the company, and are joined by their cousin, Charlotte Weber, who owns a roughly 4% stake. Ms. Weber’s Jupiter Island, Fla. home is five doors down from Mr. Strawbridge’s.

Shareholders will pick sides in a vote scheduled for next Thursday, unless there is a settlement first. At stake, should Third Point succeed, will be a family dynasty.

Dorrances have been involved in running the business since its early days. Joseph Campbell, the fruit merchant who started the company in 1869, was succeeded by Arthur Dorrance, ending the Campbell family’s association with the company. Arthur’s nephew, John T. Dorrance, eventually took over, purchased all of Campbell’s stock and left it to his heirs. He recognized the challenges of juggling a family business with the demands of innovation and competition.

Of soups, he had said, “It seemed to me easier to make them than to sell them.”

Campbell reported earnings Tuesday and said the board’s strategy was helping stem declines in its U.S. soup sales and expand its snacks business. Still, comparable sales for its latest quarter fell 3% while its profit margin tightened due to higher costs. Campbell shares rose 6% Tuesday, but the stock is down 27% from two years ago.

This account of how family disagreements brought the company to a crossroads is based on interviews with around a dozen people with close ties to the company, its heirs and the activist fund, as well as communications viewed by The Wall Street Journal.

Third Point began its proxy fight by seeking to overturn Campbell’s entire 12-member board. It has since softened its demand to five seats. Campbell offered the hedge fund two seats on an expanded board, which was declined.

Third Point has won support from two firms that advise shareholders, putting Campbell under pressure to rally investors ahead of next week’s vote in a tug of war between family members who were once allies.

Mr. Strawbridge, 81 years old, is a history scholar and successful horse breeder known for his work with steeplechase racing. He grew up on a Pennsylvania farm near his some of his cousins, and, like many of them, he went to boarding school and earned an Ivy League degree.

He taught at Widener University in Pennsylvania and his race horses have earned more than $60 million since 2000. Their names, such as Informed Decision, Smart Bid and Deal Making, reflect his business views.

Ms. Malone, Mr. Dorrance and their brother John “Ippy” Dorrance III spent much of their childhood in Arizona and attended the University of Arizona.

Ms. Malone and Bennett Dorrance became more deeply involved in Campbell after their father’s death in 1989. Some of their cousins questioned the credentials of the two siblings, but Mr. Strawbridge, who had come on the board a year earlier, argued in support of them.

Mr. Strawbridge helped Ms. Malone and Mr. Dorrance rebuff a sale of the company, and they brought in CEO David Johnson, a marketing guru with experience reducing costs and boosting sales.

By the early 1990s, Mr. Johnson had ushered the company into a renaissance by packing more chicken into its soups and defending its Goldfish crackers trademark. He spent $210,000 to buy one of Andy Warhol’s famous paintings of a Campbell soup can. Mr. Strawbridge at the time argued against spending the money. The painting still hangs in Campbell’s Camden, N.J., board room and has appreciated in value several times over.

Mr. Strawbridge, Mr. Dorrance and Ms. Malone spent time together through their involvement in the company as board members. Mr. Strawbridge and Ms. Malone, who share a passion for horses, carpooled from their Pennsylvania farms to meetings at the company headquarters.

Mr. Dorrance, who hasn’t missed a board meeting in 30 years, often served as mediator, trying to bring the family together during disagreements about how to run the business that controlled their fortunes.

He respected Mr. Strawbridge’s opinions as a successful investor. But the two men saw each other less and less after Mr. Strawbridge stepped down from the board in 2009, after he turned 72, the age limit set by company rules. This year, when Mr. Dorrance reached that milestone, the board made an exception and opted to keep him.

When Denise Morrison became chief executive in 2011, she pushed to invest in packaged fresh food, beginning with the acquisition of Bolthouse Farms for $1.55 billion in 2012. She convinced Mr. Dorrance and other board members that slacking sales of canned soup could be offset by acquiring a product line in the fast-growing refrigerated-foods section of the store.

Bolthouse Farms sold cut carrots and fresh juices, but the company didn’t understand that business, or its risk, former Campbell executives said. Mr. Strawbridge was hesitant about getting into a commodities business, but he was no longer on the board.

Campbell’s earnings took a major hit in mid-2016 as the bet soured. Its stock plunged in the months that followed.

Ms. Morrison, trying to drum up support, invited Mr. Dorrance and other board members to a carrot farm last year to learn more about the business. But the billionaires weren’t interested in picking carrots, said a person who attended. They were interested in profits, and it was clear the fresh-food business wasn’t providing a sufficient yield of them.

The board pressed Ms. Morrison to shift the company’s focus from fresh foods to snack foods, striking a deal in December 2017 to buy Snyder’s-Lance pretzels and nuts for $6 billion, including debt. The deal ballooned balance-sheet liabilities.

The deal was the tipping point for Mr. Strawbridge. In February, he emailed chairman Les Vinney, calling it reckless and copying several family members, including those on the board.

He wrote to Mr. Vinney again in March, after Campbell’s disappointing quarterly results. “Denise’s record is appalling,” he said. “The question is why are you and the other Campbell directors not alarmed.”

Mr. Vinney responded on company letterhead, saying further dialogue would not be productive. The message was signed by every board member. That ended communication between Mr. Strawbridge and the board.

Roughly two months after the email, the directors pressured Ms. Morrison to resign and tapped board member Keith McLoughlin as interim CEO.

In August, Mr. McLoughlin spent part of an earnings call rattling off a list of ways the company had lost focus. It would move to sell the fresh-food business and return the company’s focus to soup and snacks.

As reports of Mr. Loeb’s investment surfaced this summer, Mr. Strawbridge’s son, Stewart, emailed Ms. Malone’s secretary, suggesting the board explore a sale of the company to avoid an activist fight.

“I remain very concerned with the impact a public battle with Dan Loeb could have on the reputation of our family and on Campbell,” he wrote, noting that Mr. Loeb “has a long history of aggressively attacking the management and board members of his target companies in a very public way.”

Stewart Strawbridge had previously pitched the benefits of a sale to Kraft Heinz Co. to his uncle, Mr. Dorrance and Mr. van Beuren.

All the family members say their goal is to preserve their grandfather’s legacy. George Strawbridge sees Mr. Loeb as an ally who can help. His cousins on the board want to maintain their influence because they believe they know the business better than outsiders.

“We have weathered tough challenges before and know what needs to be done now,” Mr. Dorrance said.

Write to Cara Lombardo at cara.lombardo@wsj.com and Annie Gasparro at annie.gasparro@wsj.com

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