Campbell Divests C-Fresh Unit: Portfolio Refinement on Track

Campbell Soup Company CPB concluded the previously announced divestiture of the Bolthouse Farms business to Butterfly Equity’s affiliate for $510 million. Also, it completed the sale of U.S. refrigerated soup and Garden Fresh Gourmet businesses during the third quarter of fiscal 2019.

With the aforementioned moves, the company exits the underperforming Campbell Fresh (C-Fresh) unit, which will continue to be part of the discontinued operations in fourth-quarter fiscal 2019 results. Management intends to utilize the net sale proceeds to cut down debt load.

C-Fresh Sale Highlights Focus on Portfolio Refinement

Sale of the C-Fresh division is part of the company’s portfolio review and Board-led strategy. As part of this, the company had earlier unveiled intentions to divest non-key businesses — Campbell International (which includes Arnott’s and the Kelsen Group) and Campbell Fresh (C-Fresh) — to sharpen focus and enhance portfolio.

Well, the company was struggling with its C-Fresh segment for quite some time on account of softness in refrigerated soup, Garden Fresh Gourmet and Bolthouse Farms refrigerated beverages. Considering the impacts of the Campbell Fresh divestiture, management projects fiscal 2019 sales of $9,075-$9,125 million. Nonetheless, the sale of this unit looks like a deemed fit, as it will allow the company to focus more on areas with higher growth potential.

As part of the portfolio review and Board-led strategy, management also plans to bring focus on two separate businesses in the company’s key North American market — Campbell Snacks, and Campbell Meals and Beverages. That said, strengthening the presence of its growing snacks brands is part of Campbell’s core strategies. The company intends to shift focus to the fast-growing snacking category, which is expected to form about half of its proforma sales in future.

To this end, the company acquired Snyder's-Lance in the third quarter of fiscal 2018, which is helping it enhance the performance of its global biscuits and snacks portfolio. Going ahead, management expects brands under the snacking category to continue boosting performance, backed by enhanced marketing and innovation.

We believe that Campbell’s focus on enhancing portfolio and other endeavors under the Board-led strategy are likely to further boost investors’ sentiments. Notably, this Zacks Rank #2 (Buy) stock has gained 13.2% in the past three months, outpacing the industry’s growth of 6.5%.

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