CNBC News Releases



Campbell taps Goldman to examine sales of business units to pay down debt

Lauren Hirsch

  • Campbell Soup has tapped Goldman Sachs to look at selling some of its business units to help pay down debt, people familiar with the situation tell CNBC.
  • Its March acquisition of pretzel maker Snyder's more than tripled Campbell's debt burden to $9.6 billion.
  • The review comes as Campbell's faces pressure to share from activist investor Third Point

Campbell Soup has tapped investment bank Goldman Sachs to look at the possibility of selling off some of its businesses to help pay down debt left in the wake of its $6.1 billion acquisition of pretzel maker Snyder's Lance earlier this year, people familiar with the review tell CNBC.

Goldman joins a coterie of other advisers, including management consulting firm Deloitte and investment bank Centerview Partners, to advise on a "thorough and critical" review of Campbell's operations and holdings the food company announced this spring. Goldman, like Centerview, has a history with the company, having worked closely with previous CEO Douglas Conant.

Its March acquisition of Snyder's more than tripled Campbell's debt burden — to $9.6 billion at the end of the most recent quarter, from $3.1 billion a year earlier. Ratings company Moody's Investors Service cited Campbell's high leverage ratio as a problem and questioned its ability to pay down that debt when it placed its bonds on review for a possible downgrade in May. Snyder's, which makes its famed Snyder's of Hanover pretzels, also makes Cape Cod and Kettle potato chips, among other popular snack food.

The soup giant is weighing the sale of Australian cookie brand, Arnotts Biscuits and its fresh food unit, which includes carrot and smoothie brand Bolthouse Farms, said the people, who asked not to be identified because the review is private.

The company is still evaluating a number of options to shore up its balance sheet and hasn't made a formal decision yet.

A sale of the units would follow suit of a number Big Food peers have been slimming down as their market dominance is threatened by smaller, nimble upstart brands. Slimming down also paves the way for more precise deal-making, with most of today's growth driven by brands that are, for consumer giants, below scale. Company executives recently told investors that reducing debt was a high priority following the Snyder's acquisition.

The company's weak financial position has drawn attention from activist investors who are pressuring the 149-year-old soup maker to sell. The potential divestitures are likely to do little to appease Dan Loeb's Third Point, which recently disclosed a 5.65 percent stake in the company and called a sale of the business the "only justifiable outcome" of its review. The activist is teaming up with shareholder George Strawbridge, a family member of the founder, to call for the sale.

Selling Bolthouse Farms and Campbell's other fresh-foods businesses to help pay down debt would also mark the undoing of a strategy heralded by former CEO Denise Morrison to invest the cash-flow from its profitable yet laggard soup business into trendier foods. The soup company, though, stumbled with its lack of experience managing fresh food, challenges exacerbated by a California drought.

The fresh business unit is now clocking a loss of roughly $50 million, down from a $150 million gain, people familiar with the results have told CNBC.

Campbell announced the surprise departure of Morrison this spring, after it disclosed "unacceptable" earnings and announced the review.

The potential divestitures highlight the bind Big Food brands are in as they are forced to pay big prices to buy the few companies that are both growing and big enough to make a dent. For Campbell, its acquisition of Snyder's — its largest yet — was one further attempt to offset of the decline of its soup business. Campbell introduced condensed soup to the U.S. and for years profited from its ability to cheaply churn out its iconic cans. It has been unable, though, to adapt its products to appeal to today's focus on fresh and healthy food.

Campbell's soup business over the past year declined 1.9 percent.

Campbell spokesman Thomas Hushen reiterated the company's previous statement, saying that the board is conducting a "comprehensive strategic and operational review of the business, including the composition of its entire portfolio, to examine all potential paths forward" and will announce its decision on Aug. 30 when it reports fiscal fourth-quarter results.

"In the interim, we will not speculate on the result of the review," he said.

Goldman Sachs spokeswoman Leslie Shribman declined to comment.

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