Newspaper article THE JOURNAL RECORD

Campbell Soup's Future Speculated after Death of Dorrance

Newspaper article THE JOURNAL RECORD

Campbell Soup's Future Speculated after Death of Dorrance

Article excerpt

People who knew John T. Dorrance Jr. say he was a gentlemanly, compassionate man with a lot of moral commitment.

Many food-industry analysts were therefore saddened by the unexpected death on Sunday of Dorrance, a former chairman of the Campbell Soup Co. and the head of the family that owns 58 percent of Campbell's stock. He was 70.

But in the cold world of Wall Street, such sorrows rarely translate into trading activity. With the news of Dorrance's death, however, Campbell's stock shot up $4.875, to $38.25, on Monday amid widespread speculation that Dorrance's descendants will put the company into play.

As one analyst, who understandably requested anonymity, put it: ``Wall Street's been waiting for this man to die for a long time.''

Rightly or wrongly, Dorrance, who controlled about 32 percent of the stock, has long been perceived by Wall Street as the main stumbling block between Campbell and a lucrative takeover.

There is little question that the company would be a prize plum. Its brand names - like Campbell Soup, Pepperidge Farm, Swanson dinners, and V-8 juices - are generally thought to be worth their weight in gold.

Yet Campbell somehow never seemed to wring much profit from its product portfolio. Its profit margins are under 10 percent, among the lowest in the industry, and its return on equity was just 15.3 percent last year in an industry that routinely tops 20 percent. Its long-term debt is virtually non-existent in an industry where 35 percent is generally considered a healthy debt level.

``This is clearly the most undermanaged company in the packaged-goods industry,'' said June D. Page, an analyst with Bear, Stearns & Co.

Although Dorrance had not officially been active in Campbell management for several years, many analysts said that R. Gordon McGovern, Campbell's chief executive, catered far more to Dorrance's interests than to those of shareholders.

They say it was Torrance's gentle prodding that made Campbell one of the first companies to provide on-site day-care centers, to give extensive notice of plant closings to workers, even to keep plants open longer than was financially sensible in order to preserve jobs. While that may have made Campbell a model corporate citizen, it also made it one of the most sluggish companies - both by marketing and financial standards - in its industry.

In other words, Campbell had, in takeover terms, all the earmarks of a sitting duck, except for one thing. Dorrance, whose father co-founded the company, wanted Campbell to remain independent. …

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