Following a strategic review and the first release of its full-fiscal-year sales, Campbell Soup Co. today (Aug. 30) announced a reorganization that includes plans to sell off most recent acquisitions and to focus on domestic, processed foods.
The company promised three actions to improve performance:
1. Focus the company on two distinct businesses, Campbell Snacks and Campbell Meals and Beverages, in its core North American market;
2. Divest non-core businesses (its international and fresh businesses, explained two paragraphs below);
3. Reduce debt overall and increase cost savings to $945 million by FY2022, including expected Snyder’s-Lance savings.
Among the targeted divestitures, Campbell International included Arnott’s and the Kelsen Group, along with the company’s manufacturing operations in Indonesia and Malaysia and its businesses in Hong Kong and Japan. Campbell Fresh includes Bolthouse Farms, Garden Fresh Gourmet and the company’s refrigerated soup business.
Most of the divestitures were acquisitions engineered by former CEO Denise Morrison, who resigned abruptly May 18. Fiscal 2018 net sales of these businesses totaled approximately $2.1 billion.
The most recent acquisition, Snyder’s-Lance, does not appear to be on the table. Not mentioned, of course, is a sale of the entire company, something “activist investor” Daniel Loeb and his Third Point investment fund have been pushing for since they bought an estimated $300 million worth of Campbell stock a month or so ago.
In Campbell’s 2018 fiscal year, which ended July 31, total sales were nearly $8.7 billion, up significantly from 2017’s $7.9 billion. But earnings before interest and taxes were $469 million, down two-thirds from 2017’s $1.4 billion.
A strategic review has been under way since Morrison departed in May. “Campbell’s Board of Directors considered a full slate of strategic options, including optimizing the portfolio, divesting businesses, splitting the company, and pursuing a sale,” said Keith McLoughlin, who has been interim president/CEO since Morrison’s departure.
“The Board concluded that, at this time, the best path forward to drive shareholder value is to focus the company on two core businesses in the North American market with a proven consumer packaged goods business model. Importantly, the Board remains open and committed to evaluating all strategic options to enhance value in the future.”
“We are moving forward with a sense of urgency to complete these changes in fiscal 2019, setting the foundation for sustainable, profitable growth in fiscal 2020 and beyond. The Board and management team are committed to deleveraging the company, retaining our investment grade credit rating and maintaining our dividend. We will pursue further actions in addition to those announced today to optimize our portfolio and performance.”
Campbell has engaged Goldman Sachs and Centerview Partners to help divest the International and Fresh businesses.
