Campbell Soup seeking buys in emerging and domestic markets

Provided exclusively by Mergermarket

Campbell Soup (NYSE:CPB) is interested in acquisitions in the US and developing markets, CEO Denise Morrison said Thursday.

During her prepared remarks on the 2Q16 earnings call, Morrison outlined the company’s results in emerging markets, noting that declines in Indonesia were offset by growth in Malaysia. She said Campbell’s primary focus in China had been Kelsen Group, which it had taken steps to improve since its acquisition in 2013.

“We believe it’s important for Campbell to become more geographically diverse, despite short-term volatility in developing markets,” Morrison said.

In the Q&A session, JPMorgan analyst Kenneth Goldman asked why Campbell would be willing to risk acquiring in less stable emerging markets rather than pursuing domestic assets.

The CEO said she expected the company’s current footholds in China and Southeast Asia to continue to be viable, particularly within the Global Biscuits and Snacks division. She noted that these areas were still growing faster than the domestic market, despite a decrease in their growth rate. The CEO added that 70% of food industry growth was expected to come from emerging markets in the next decade.

“We believe we need to continue in a smart way to expand our geographic footprint,” Morrison said. “That said, we’ll continue to look for smart M&A, both in emerging markets and also domestically in sync with our strategy.”

Later on the call, Goldman Sachs analyst Jason English asked for further details on the company’s M&A appetite. CFO Anthony DiSilvestro said Campbell had successfully diversified its portfolio into higher growth spaces, with four acquisitions made in the last few years.

“We will continue to look for opportunities to push further into higher growth spaces,” he said. “That being said, we continue to be disciplined in how we approach M&A. Deals have to be strategically compelling, they have to be financially attractive, and they have to be able to create shareholder value for us.”

Asked to comment on the M&A environment, the CFO said multiples remained quite high.

“We have a pretty diligent effort in the area and group of people looking at it. We have a pipeline. It’s not a long, long list of opportunities. It’s fairly tight. We continue to build relationships with companies that are perhaps family-owned or private and we’ll just continue to work it,” he said.

In his prepared remarks, DiSilvestro reported a USD 150m reduction in net debt, with the company’s positive net cash flow more than offsetting the impact of its Garden Fresh Salsa Company acquisition.

Campbell said in June it would buy Michigan-based Garden Fresh, a provider of branded refrigerated salsa, for USD 231m. In a press release announcing the deal, Campbell said it had added a “trio of growth engines” to its business in the past several years, acquiring Bolthouse Farms in 2012, and organic baby-food company Plum Organics and biscuit company Kelsen in 2013. The release noted that these deals were made in response to increased consumer interest in fresh foods and health and well-being.

Campbell’s three principal divisions are Americas Simple Meals and Beverages, Global Biscuits and Snack and Packaged Fresh.

Morgan Stanley and Davis Polk & Wardwell advised on the Bolthouse acquisition. Davis Polk has also been used for other domestic deals, including Plum, according to the Mergermarket M&A database. Morgan Lewis & Bockius advised on the Garden Fresh transaction. In-country law firms have been used on several occasions, including Bruun & Hjejle for the Denmark-based Kelsen purchase.

Camden, New Jersey-based Campbell has a market capitalization of USD 19.4bn.

As seen in the mergermarket newsletter on 26/02/2016



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