Bath & Body Works adds director, Third Point backs off proxy fight

2/2 © Reuters. FILE PHOTO: Shoppers wait in line outside a Bath and Body Works retail store in Brooklyn, New York, U.S., December 8, 2020. REUTERS/Brendan McDermid/File Photo 2/2

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Bath & Body Works Inc on Monday named veteran financial executive and board member Thomas Kuhn as a new director, ending a potential challenge from billionaire investor Daniel Loeb's hedge fund Third Point.

Kuhn, a lawyer and former banker who is currently a managing member of advisory and investment firm Doorbrook LLC, joins the board at the end of the week as its third newcomer and was recommended by Third Point, the company said in a statement.

Third Point, which owns a 6% stake in the home fragrance and personal care retailer, had been laying the groundwork for a proxy fight after pushing the company to make changes for months. The hedge fund on Monday said it will not nominate directors this year after the company added Kuhn to the board.

"Tom’s 35 year history as a respected financial and legal advisor, including working with consumer companies, will bring an important perspective to Bath & Body Works as it focuses on its key strategic initiatives to maximize shareholder value," Bath & Body Works board chair Sarah Nash said in a statement.

The Hershey Company (NYSE:HSY) Chief Financial Officer Steve Voskuil and senior Conagra Brands (NYSE:CAG) executive Lucy Brady were both added in February, making Kuhn the board's 13th member. Third Point had also recommended Brady.

Kuhn's arrival appears to have calmed the rising tensions between Loeb, who had pushed for a shareholder to join the board, and the company, which rejected Loeb's suggestion to add Third Point's former co-chief investment officer as a director.

For months, Loeb had criticized how Bath & Body Works was spending its capital and pressed for the board to add more industry expertise in consumer goods and to better police excessive executive compensation.

Nash's $18 million pay package for stepping in as interim chief executive officer for several months in 2022 before the company hired Unilever (NYSE:UL) veteran Gina Boswell as its new chief was a particular flashpoint for the hedge fund.

But Loeb also signaled good will toward the new CEO when he told his own investors last month, "We believe BBWI can change its equity story, improve its earnings power, and earn a more premium valuation."

Bath & Body Works, which is valued at roughly $10 billion, has been operating as a standalone company since 2021. Its stock price was largely flat at $39.68 in morning trading with the broader market broadly higher.

While the two sides didn't officially reach a settlement, there will now be no proxy contest, something the company said would have been distracting and expensive for the new CEO. Similarly Nelson Peltz's Trian Fund Management ended its proxy fight against Walt Disney (NYSE:DIS) Corp after Bob Iger, who came back as CEO last year, announced restructuring and cost-cutting plans.

At Bath & Body Works the company was advised by law firm Wachtell Lipton Rosen & Katz, financial services company J.P. Morgan Chase & Co, proxy solicitor Innisfree M&A Inc and public relations firm Joele Frank.