Billionaire investor Daniel Loeb told retailer Bath & Body Works on Wednesday that his hedge fund Third Point plans to launch a board challenge and said the company’s addition of new directors does not address his concerns about governance, capital allocation and executive pay.
“As fiduciaries, we have no choice but to put forth qualified director candidates and give our fellow shareholders the opportunity to elect directors who can hold the stewards of their capital responsible for the decisions they make,” Third Point founder Daniel Loeb wrote in a letter to the company’s board.
Bath & Body Works said in a statement late on 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 nominations.
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 engagement with Third Point.
The board considered the hedge fund’s feedback that the company would benefit from additional financial and capital allocation expertise, Bath & Body Works said, adding that it was unfortunate that Third Point has announced its intent to pursue a costly public proxy fight.
Tensions had been simmering between the two sides for months ever since Third Point announced in December it owned a roughly 6% stake in the specialty retailer, criticized the company’s high costs and its lagging share price.
Third Point followed through and announced its board challenge hours after Bath & Body Works on Tuesday said that it was adding a second new board member, possibly to assuage the hedge fund’s criticisms.
The move did not appease Loeb and he accused the group of “operating in triage mode” instead of following best corporate governance practices. He said that the board left him no choice but to mount a proxy fight because his requests to add a shareholder representative to the board were ignored.
“Our discussions have stalled and our concerns about the way this board operates have intensified,” the letter said.
He declined to say how many director candidates he would nominate or to identify them but said that one of his potential candidates had been rebuffed by the company.
The board currently has 12 members and the window to nominate directors stretches into next month.
Loeb also took aim at Sarah Nash, the company’s current board chair who had briefly assumed the role of interim chief executive last year.
She was paid $18 million on top of the $700,000 she was receiving to be board chair, Loeb wrote, calling the pay package “outsized,” saying it signals a massive governance failure. Loeb said the company bungled its succession planning and that Nash was “ill-suited” for interim CEO role.
The company appointed Gina Boswell as CEO late last year.
Bath & Body Works is valued at roughly $10 billion. On Thursday, the company reported net sales for the fourth quarter of 2022, ended Jan. 28, were down 5 percent year-on-year at $2.8 billion. Full-year 2022 net sales decreased 4 percent to $7.5 billion, from $7.8 billion. For the first quarter of 2023, the company expects net sales to decline in the low-to-mid single digits.
This marks Third Point’s first proxy fight since 2018 when it challenged Campbell Soup Co.
By Svea Herbst-Bayliss
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