Why Campbell Should Consider Selling Itself Campbell is reviewing its options, but a quick sale to someone like Kraft Heinz offers many advantages
The Campbell's soup logo is seen on the floor of the New York Stock Exchange. The company’s shares fell by 44% over the two years through the end of May, but have since risen by 23% on reports of a possible sale. Photo: Richard Drew/Associated Press
By
Aaron Back
July 5, 2018 5:30 a.m. ET
2 COMMENTS
Campbell Soup Co. has been one of the worst performing food companies over the past two years. If a quick way out is available, the family members who control the firm should give it serious consideration.
Campbell’s stock has rebounded sharply over the past month on speculation that the company is considering an outright sale, perhaps to an industry giant like Kraft Heinz.
This wouldn’t be entirely surprising. When Campbell’s Chief Executive Denise Morrison stepped down in May, the company said it is reviewing its entire portfolio, that all options are on the table and that “there are no sacred cows.” The company said it would report back on the results of the review by the end of August. The current interim CEO told employees in May that his strategy isn’t to sell the company, The Wall Street Journal has reported.
Campbell could work to optimize its existing portfolio. Most likely this would consist of selling off underperforming fresh food brands like Bolthouse Farms while reinvesting in faster-growing snack lines like Pepperidge Farm and the recently acquired Snyder’s-Lance.
Ideally, the company would also bring some fresh thinking to its core canned soup brand, perhaps by introducing contemporary elements like organic ingredients. This would be along the lines of what Conagra has achieved with dated frozen brands like Banquet. Campbell might even consider a refresh of their once iconic, now tired can design.
But this will be a long and drawn-out process with uncertain prospects for success. Campbell’s ability to invest for growth will also be constrained by the imperative to reduce its debt overhang. The Snyder’s-Lance acquisition raised the company’s net debt to $9.6 billion at the end of the most recent quarter, from $3.1 billion a year earlier.
The company said at the time of the deal that it would reduce the ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization from 4.8 times to 3.0 times by 2022. On a conference call following Ms. Morrison’s departure in May, Chief Financial Officer Anthony DiSilvestro reiterated that “our priority is to de-lever the balance sheet following the Snyder’s-Lance acquisition.”
Against that backdrop, an outright sale starts to look more appealing. The conventional wisdom has been that Campbell would be a difficult company to sell due to the high ownership stake of the Dorrance family who between them hold 41% of the company.
But these family members have just been through a traumatic period of watching their wealth evaporate. The company’s shares fell by 44% over the two years through the end of May. They have since risen by 23% on reports of a possible sale. At just 15 times forward earnings currently, compared with a five-year average of 17.5 times, there could be upside left in the shares if a sale does happen.
John Dorrance invented the formula for Campbell’s condensed soup over 120 years ago. For his descendants, it may finally be time to move on.
Write to Aaron Back at aaron.back@wsj.com
Message #4862 from richardred at 5/21/2018 9:45:32 AM
RE-CPB interim CEO say's Campbell's is not up for sale. Sure, I've heard that one before. Almost any company goes for the right price. IMO-It just means no one offered to by the whole company and you would need the Dorrance stamp of approval . After all, last week you just said everything is on the table. There's no scared cows.
Message #4899 from richardred at 6/26/2018 11:23:03 AM
RE- CPB Taking profits - Always good to hear all points and views. Exactly why I say. "Listen to What Everybody Has to Say, but do What You Think is Right Yourself". BTW most everybody I saw at Twitter, thought Doug was crazy for buying CPB in the first place. What we do know is CPB will most likely sell something piecemeal, if not the whole company. What we do know, CPB will be getting a new CEO. Long term, I don't think there is any credence being given to a new CEO being innovative with the brands at hand. IMO the Dorrance family wants a new direction. This possibly lead to Denise Morrison departure. Although a more apples to oranges story. The story reminds me of Hewlett Packard. Where Carly Fiorina stepped down after the struggling company bought Compaq. Another historic related point. Hershey who has a big trust rejected A $23 billion Mondelez takeover offer. Another historic related point. Why would the Wrigley's family accept an offer. <O> wink.
BTW
I've noticed Doug Kass has taken his profit.
P.S. Talk about innovation. One interesting past history point. Campbell's was once in the restaurant business.
>Annabelle's and H.T. McDoogal's – Restaurant chains, sold 1988 - Why in the name of Soup wouldn't you use the Campbell's name on them?
Can anybody but me imagine what appeal impact a Campbell's soup kitchen restaurant concept might have? IMO lower consumer scale than Panera Bread. However plenty of healthier snacks to stock and offer. Soups and healthier beverages if this hypothetical could happen?
Soup might taste better this coming Jan. 2019
| To: richardred who wrote (2276) | 6/25/2012 12:40:13 PM | | From: richardred | Read Replies (1) | Respond to of 4898 |
| HSY has had a good run since I sold. Maybe that can start by buying privately held companies such as Just Born-maker of Peeps (based in PA)or something from private equity. Tootsie Roll Industries Inc. (TR) is still very expensive even though it's come down in price. Have to go overseas because there aren't many public candy companies left to buy. Sweet snacks, I'll be looking.
Hershey to Make Acquisitions Priority for Use of Cash, CEO Says
By Duane D. Stanford - Jun 25, 2012 11:15 AM ET
Hershey Co. (HSY) Chief Executive Officer John P. Bilbrey said acquisitions will be the priority for the chocolate maker’s cash as the company looks to take confectionery-market share in North America and expand abroad.
The company sees $10 billion in potential local and regional acquisitions across the globe, Chief Growth Officer Michele Buck said today during an investor meeting in New York that was webcast. Including other categories such as sweet snacks, acquisition opportunities total as much as $30 billion, Buck said.
Hershey is seeking to surpass Mars Inc. to become the largest confectionery company in North America. The 2008 purchase of Wm. Wrigley Jr. Co. by Mars created the world’s biggest candy maker. Hershey is targeting China to be its second-largest market, after the U.S., within five years as it strives to boost revenue to $10 billion. Last year, Hershey had sales of $6.1 billion. The company also sees significant opportunity in India.
The Hershey, Pennsylvania-based chocolate maker passed on a chance to buy Cadbury Plc in 2010. Kraft Foods Inc. (KFT) purchased Cadbury that year. Hershey had $567.3 million in cash and equivalents on April 1, according to data compiled by Bloomberg.
Hershey fell 0.5 percent to $69.18 at 11:01 a.m. in New York. The shares had risen 12 percent this year through June 22.
bloomberg.com
Farley's & Sathers and Ferrara Pan Complete Merger
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By Farley's & Sathers Candy Company, Inc.; Ferrara Pan Candy Company, Inc.
Published: Monday, Jun. 18, 2012 - 6:05 pm
ROUND LAKE, Minn. and FOREST PARK, Ill., June 18, 2012 -- /PRNewswire/ -- Farley's & Sathers Candy Company, Inc. ("Farley's & Sathers") and Ferrara Pan Candy Company, Inc. ("Ferrara Pan") today announced that they have completed their previously announced merger. The combined company, which will be called Ferrara Candy Company, Inc., will be a leading general line candy manufacturer.
Salvatore Ferrara II, Chairman and CEO of Ferrara Candy Company, Inc., said, "We are pleased to complete the transaction, which creates a leader in our category. The new Ferrara Candy Company will offer a robust portfolio of branded and private label confections that consumers love, from Lemonheads® and Red Hots® to Trolli®, Brach's® and Now and Later®. Together, we are entering an exciting new chapter that will allow us to delight our customers with the same great products they know and love, while continuing to innovate our offerings. I want to thank the hard working employees of both companies for their support throughout this process and together, I am confident we will reach new heights."
Catterton Partners, the leading consumer-focused private equity firm, which owns Farley's & Sathers, will remain as a majority investor in the combined company.
"This transaction brings together the best products and people in the industry," said Scott Dahnke, Managing Partner of Catterton Partners. "The combination will leverage Ferrara Pan's and Farley's & Sathers' combined portfolio of iconic brands, collective knowledge and expertise, and broad supply chain to create a powerhouse in confections. As shareholders, we look forward to the significant upside that will result through this compelling combination."
About Farley's & Sathers
Since its inception on February 20, 2002, Farley's & Sathers Candy Company, Inc. has become one of the top 25 manufacturers of confections in the world. Headquartered in Round Lake, Minnesota, Farley's & Sathers Candy Company, Inc. is a leading manufacturer and distributor of quality confectionery and gum products, offering full line, full service opportunities to all classes of trade in the United States. The company's success in the industry, experience with acquisitions, and significant capital resources established Farley's & Sathers Candy Company as a leader in the confection industry. Farley's & Sathers Candy Company has developed its business both through internal growth and through the acquisitions of famous confectionery brands, including FARLEY'S®, SATHERS®, HEIDE®, JUJYFRUITS®, NOW AND LATER®, BOBS®, SWEET STRIPES®, SUPER BUBBLE®, FRUIT STRIPE®, RAIN-BLO®, TROLLI®, CHUCKLES®, AND BRACH'S®. For a complete list of our famous brands, check out our legal section under "All about Farley's & Sathers" at www.farleysandsathers.com.
About Ferrara Pan Candy Company
Ferrara Pan Candy Company was founded by Salvatore Ferrara in 1908 and began as a manufacturer of Italian pastries and sugar coated candy almonds. In 1919, Salvatore Ferrara, Salvatore Buffardi and Anello Pagano, brothers-in-law, formed a partnership to engage in the manufacturing of a wide variety of confections and the same families continue to own and manage the Ferrara Pan Candy Company today. The company is well known within the industry as being a world class leader in manufacturing and processing. Using the very finest, pure, wholesome ingredients, Ferrara Pan manufactures both branded and private label confections that consumers love, including Lemonheads®, Red Hots® and Black Forest® gummies. For more information, please visit the company's website, www.ferrarapan.com.
About Catterton Partners
With more than $2.5 billion currently under management and a twenty-three year track record of success in building high growth companies, Catterton Partners is the leading consumer-focused private equity firm. Since its founding in 1989, Catterton has leveraged its category insight, strategic and operating skills, and network of industry contacts to establish one of the strongest private equity investment track records in the middle market consumer industry. Catterton Partners invests in all major consumer segments, including Food and Beverage, Retail and Restaurants, Consumer Products and Services, Consumer Health, and Media and Marketing Services. Catterton's investments include: Restoration Hardware, Cheddar's and Noodles restaurants, Frederic Fekkai, Build-A-Bear Workshop, Kettle Foods, Odwalla and P.F. Chang's China Bistro. More information about Catterton Partners can be found at cpequity.com.
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