Why Carl Icahn’s Plan Alone Just Isn’t Enough for Newell Brands

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Newell Brands Inc. (NYSE: NWL) is a company that may seem like it’s trying to turn around, but it is still a company that is in trouble. Newell may very well need even more leadership changes and other radical efforts ahead in its ongoing activist investor fight.

The company’s recent announcement that Newell intends to nominate David L. Atchison to the board of directors at the coming 2018 annual shareholder meeting should be viewed as good news. After all, Atchison is said to be very well experienced and is said to be the final independent nominee under its cooperation agreement with activist investor Carl Icahn.

Unfortunately, the Icahn involvement in Newell just may not be enough. This is not an effort to bash Icahn here at all, but it should be viewed that even more may be needed to rectify the problems at Newell. Starboard Value is also involved in an activist campaign against Newell, and it is even involved with Icahn.

For the record, it should at least be considered that the Icahn effort is carrying a larger stick than Starboard. Starboard and its related entities own roughly 3.8% of Newell, versus roughly a 6.9% stake of Icahn and related entities.

Management’s prior plan to carve out even more of the company’s brands as a focal event is similar to why fixing the health care system is so hard — you just cannot sell a story of declining revenues and a deeper focus to investors all that well.

According to an SEC filing, Atchison brings over 15 years of experience in e-commerce marketing analytics with Zulily and RedEnvelope as brands. And Atchison is said to have spent most of his career developing marketing strategies that position businesses for growth and sustained value creation. The company also called him a “profit-driven executive with a distinguished track record of directing multi-channel marketing programs” with expertise in e-commerce optimization through best-in-class analytical practices across multiple sectors of retail.

Newell has responded to Starboard previously. And the company just named Patrick Campbell, the former CFO of 3M Co. (NYSE: MMM) as non-executive chair back on March 19.

Starboard posted an SEC filing showing that it is not going to let up in its fight against Newell. The SEC filing shows a new slate of candidates for Newell’s board and it criticized Newell as follows:

We are seeking to elect a minority of the Board because we do not believe that the recent changes at the Company, including the agreement with Carl C. Icahn, are sufficient to address Newell’s subpar operating and financial performance. We believe poor execution and a series of operational missteps have resulted in severe share price underperformance compared to both industry peers and the broader market. Therefore, we believe that the current situation is unacceptable.

In addition, we remain disturbed by the turnover at the Board level. In late January 2018, three well-respected directors of Newell (…) simultaneously resigned from the Board, indicating to us that there were differences of opinion in the boardroom as to the Company’s strategic direction moving forward. Shortly thereafter, two additional directors (…) also resigned from the Board. We believe that the departures of these directors left a void in the boardroom and we are not convinced that the agreement with Mr. Icahn, which included the appointment of three of his direct representatives, will result in the necessary change at Newell.

We believe that the following public statement by Mr. Conroy following his resignation from the Board in March demonstrates the need for change at Newell – “I resigned because I do not believe that the current course is the optimal path forward for the company. I am not comfortable with recent events and have come to believe that change is needed.” Based on recent developments, it appears that the Company agrees change is needed. Now, it is about making sure that the right change is effected.

While the agreement with Mr. Icahn gives the appearance of substantial change, and the expanded transformation plan is a step in the right direction, we question the circumstances and motivation that drove such an accord. Our sole motivation is to ensure the most qualified directors are in place to make Newell a stronger, more profitable, and, ultimately, more valuable company, while ensuring that the best interests of all stockholders are appropriately represented in the boardroom. Starboard has nominated an experienced and accomplished group of director candidates with a shared mission of helping to oversee a turnaround of Newell.

Patrick Campbell, Newell’s board chair, said:

Dave is a proven value creator as an e-commerce marketing and analytics expert with significant knowledge of brand development and retail. His perspective and expertise will serve us well as we continue to execute our strategic initiatives and work to improve financial and operational performance and deliver enhanced shareholder value… With this announcement, the Board has completed its slate of directors to stand for election at the 2018 Annual Meeting. We are confident that this Board will have the right mix of skills, expertise and experience to successfully support the management team as we execute our expanded transformation program.

With the expected election of Mr. Atchison and Judith Sprieser at the 2018 Annual Meeting, Newell Brand’s Board will comprise 11 highly qualified and experienced directors, 10 of whom will be independent and all of whom will be seasoned leaders.

Newell definitely has its problems internally. One thing that cannot be ignored is that it also has external problems. There is really no attraction at all here for outside investors, and there may not be any sort of stock market that is good for the company. It’s hard to live with disappointment after disappointment after leveraging up to buy more and more consumer brands. Then add on a flight into stock market volatility.

A day before Newell named Campbell as its board chair, its shares were close to $29.00. With a 2.4% gain to $25.50 on Wednesday, its shares are handily lower, even if it might be able to blame some weakness on the market drop and volatility as investors are looking for quality.

Newell has a 52-week trading range of $23.85 to $55.08, so the market is now valuing Newell at less than half of what it was in 2017. Its consensus analyst target price from Thomson Reuters is $29.86, down from $30.00 a month ago and from $36.79 after the start of 2018.