In sync with its portfolio refinement efforts, Campbell Soup Company CPB has concluded the sale of Arnott’s and certain International operations to a New York-based private equity firm, KKR KKR, for almost $2.2 billion in cash. Management intends to utilize the net sale proceeds to lower debt. Also, the move is likely to help the company focus on prospective businesses like the North American operations. Let’s take a closer look at this latest development.
Portfolio Restructuring Moves to Drive Growth
Campbell has been undertaking prudent actions to exit non-key businesses to optimize its portfolio and focus more on areas with growth potential. Back in 2018, the company had announced plans to review prospects for the divestiture of the Campbell International segment, which includes the Kelsen Group business. Following the transaction, Campbell has now completed the envisioned divestiture for roughly $2.5 billion. Campbell’s International operations include Campbell’s simple meals businesses in Australia, Malaysia, Hong Kong and Japan, and manufacturing in Australia and Malaysia.
Per the deal, Campbell and KKR have entered into a licensing agreement for the exclusive rights to use certain Campbell brands, which includes Campbell's, Swanson, V8, Prego, Chunky and Campbell's Real Stock, in Australia, New Zealand, Malaysia and other select markets in Asia, Europe, the Middle East and Africa.
In prior developments related to portfolio restructuring, the company divested Kelsen Group, a manufacturer of baked snacks, on Sep 23. Apart from this, Campbell exited the underperforming Campbell Fresh (C-Fresh) unit in fiscal 2019. Well, the company was struggling with the segment for quite some time due to softness in refrigerated soup, Garden Fresh Gourmet and Bolthouse Farms refrigerated beverages. The company also offloaded its European Chips business in October.
Such divestitures will allow Campbell to focus on businesses in the North American market — Campbell Snacks and Campbell Meals & Beverages.
Notably, snacks brand-improvement initiatives are an essential part of Campbell’s core strategies. Evidently, the acquisition of Snyder's-Lance in the third quarter of fiscal 2018 is helping it enhance the performance of global biscuits and the snacks portfolio. Going ahead, the fast-growing snacking category is expected to comprise about half of the company’s proforma sales. It is, hence, continuing to focus on this arena through enhanced marketing and innovation.
Therefore, we believe that Campbell’s portfolio refinement moves will yield results in the forthcoming periods and help it strengthen footing in the food space. This Zacks Rank #3 (Hold) stock has surged 48.9% in the year so far compared with the industry’s growth of 19.5%.
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