Campbell Soup Company
) recently announced that it has completed the acquisition of
Bolthouse Farms from private-equity firm Madison Dearborn Partners,
LLC by paying $1.55 billion in cash. The company resorted to short-
and long-term borrowings to fund the acquisition.
The company has stated that it will operate Bolthouse Farms as a
separate business unit. Moreover, Campbell expects that the
acquisition will be accretive to its bottom-line and add nearly 5
cents - 7 cents to its fiscal 2013 earnings per share. We believe
this inorganic move will enhance the company's brand portfolio and
presence in the U.S. packaged fresh foods market.
As awareness for healthy fresh foods is increasing in the U.S.,
the transaction is expected to be the best strategic fit for
Campbell since Bolthouse is one of the leading producers of fresh
foods and beverages in the U.S. The transaction is anticipated to
facilitate Campbell in enhancing its market share in the packaged
fresh food market, which is worth $12.0 billion.
The products of Bolthouse will compliment Campbell's V8 beverage
segment. The segment is likely to bring consolidated sales of the
company to $1.2 billion, representing 10% of the market share.
Other companies in the beverage segment are also moving toward
healthier products. Earlier,
) announced its decision to start selling yogurt in the U.S.
Based in Bakersfield, California, Bolthouse has approximately
100 years of experience in developing, manufacturing, and marketing
packaged fresh foods in the U.S. The company is one of the market
leaders in fresh carrots, premium beverages and refrigerated salad
dressing. Bolthouse markets and sells its products under three of
its brands - Bolthouse Farms, Earthbound Farms and Green Giant.
Excluding the acquisition costs, Campbell expects to deliver its
full fiscal 2012 results as per its earlier projections. The
company expects fiscal 2012 sales growth to remain at the lower end
of its earlier guidance range of flat to 2%. EBIT for the period is
anticipated to be at the lower end of 7% to 9% range, while
earnings per share to be in the range of 5% to 7%.
We believe that Campbell's prudent investment and strategic
initiatives toward product innovation and brand building will lead
to an increase in its customer base and profitability. Moreover,
the company's continuous focus on research and development, in
order to further differentiate its higher-margin sauce brands, will
strengthen its position in the international markets.
However, rising commodity costs, intense competition from other
established players and exposure to unfavorable foreign currency
fluctuations may undermine its growth prospects.
Campbell, which currently competes with
General Mills Inc.
H.J. Heinz Company
), has a Zacks #3 Rank, implying a short-term Hold rating.
Moreover, we have a long-term 'Neutral' recommendation over the
Based in Camden, New Jersey, Campbell Soup is one of the world's
leading manufacturers of convenience food products. A strong
portfolio of well-established brands, including Campbell's, Erasco,
Liebig, Pepperidge Farm, V8, Pace, Prego, Swanson, and Arnott's
offer a competitive edge to the company and strengthens its
position in the market.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
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