Third Point Plans Proxy Contest at Bath & Body Works

Billionaire investor Daniel Loeb told retailer Bath & Body Works on Wednesday that his hedge fund Third Point plans to issue a challenge to the board and said adding new directors to the company does not address his concerns about governance, capital allocation and executive pay.

“As fiduciaries, we have no choice but to put forward qualified director candidates and give our fellow shareholders the opportunity to elect directors who can hold their equity managers accountable for the decisions they make,” wrote Third Point founder Daniel Loeb, in a letter. to the company’s board of directors.

Bath & Body Works said in a statement late Wednesday: “The Board strongly disagrees with the views expressed in Third Point’s letter.” However, it said it would review and consider Third Point’s proposed board appointments.

The company also said the additions of Lucy Brady and Steve Voskui to its board earlier this month were a product of the board’s involvement with Third Point.

The board considered feedback from the hedge fund that the company would benefit from additional financial and capital allocation expertise, Bath & Body Works said, adding it was regrettable that Third Point had announced its intention to pursue an expensive fight public by proxy.

Tensions had simmered between the two sides for months since Third Point announced in December that it held a roughly 6% stake in the specialty retailer, criticizing the company’s high costs and lagging share price.

Third Point has gone ahead and announced its challenge to the board hours after Bath & Body Works said on Tuesday it was adding a second new board member, possibly to assuage criticism from the hedge fund.

The move didn’t sit well with Loeb, and he accused the group of “operating in triage mode” rather than following best corporate governance practices. He said the board gave him no choice but to mount a proxy fight because his requests to add a shareholder representative to the board went unheeded.

“Our discussions have stalled and our concerns about the way this council operates have intensified,” the letter said.

He declined to say how many director candidates he would nominate or identify them, but said one of his potential candidates was rejected by the company.

The board currently has 12 members and the window for appointing directors extends into next month.

Loeb also took aim at Sarah Nash, the company’s current chairman, who briefly took over as interim chief executive last year.

She was paid $18 million on top of the $700,000 she was paid to be chairman, Loeb wrote, calling the pay package “overwhelming”, saying it signals a massive governance failure. Loeb said the company screwed up its succession planning and that Nash was “unsuited” for the interim CEO role.

The company named Gina Boswell as CEO late last year.

Bath & Body Works is valued at around $10 billion. On Thursday, the company reported that net sales for the fourth quarter of 2022, ended Jan. 28, were down 5% year-on-year to $2.8 billion. Net sales for the full year 2022 decreased 4% to $7.5 billion from $7.8 billion. For the first quarter of 2023, the company expects net sales to fall into the low-to-mid single digit range.

This marks Third Point’s first proxy fight since 2018, when it challenged Campbell Soup Co.

By Svea Herbst-Bayliss

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