Campbell Soup Company
) recently entered into an agreement to acquire Bolthouse Farms
from private-equity firm Madison Dearborn Partners, LLC. This
inorganic move of Campbell will enhance its brand portfolio and
presence in the U.S. packaged fresh foods market.
The deal has been finalized at $1.55 billion in cash and
expected to close by late summer 2012. As of April 29, 2012 the
company had cash and cash equivalent of $383 million, which we
believe was not sufficient to fund the acquisition. So, Campbell
would fund the acquisition through short- and long-term borrowings
and will operate it as a separate business unit. Campbell expects
the acquisition to be accretive to the company's bottom-line and
will add nearly 5 cents to 7 cents in fiscal 2013 earnings per
As awareness for healthy fresh foods is increasing in the U.S.,
the transaction is expected to be the best strategic fit for
Campbell as Bolthouse is one of the leading fresh foods and
beverages sellers in the U.S. The transaction is expected to
facilitate Campbell in enhancing its market share in the $12.0
billion packaged fresh food market.
The products of Bolthouse will compliment Campbell's V8 beverage
segment, which is expected to boost 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. Recently,
) announced its decision to start selling yogurt in the U.S. very
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 in the U.S. Bolthouse markets and sells its products under
brands Bolthouse Farms, Earthbound Farms and Green Giant.
Following the transaction, Campbell expects to deliver its full
fiscal 2012 results as per its earlier guidance ranges. 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 decline at the lower end of 7% to 9% range while
earnings per share may decline at the upper end of the guidance
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 to
further differentiate its higher-margin sauce brands will
strengthen its position in international markets. However, rising
commodity costs, intense competition from other established players
and exposure to unfavorable foreign currency fluctuations may
undermine the company's 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 on the
stock. Moreover, we have a long-term Neutral recommendation over
Campbell Soup is one of the world's leading manufacturers of
convenience food products. Furthermore, 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 strengths its well-established
position in the market.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
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