Campbell Soup Company CPB has completed the buyout of Snyder’s-Lance, Inc. for a total cash outlay of roughly $6.1 billion or $50 per share. This will be part of the company’s Global Biscuits and Snacks segment including the Pepperidge Farm, Arnott’s and Kelsen businesses.
In order to attain cost synergies and revenue opportunities better, management will integrate with the Pepperidge Farm, which together will form Campbell Snacks, a unified snacking firm in the United States. This acquisition is likely to aid Campbell in fortifying its snacking brands’ portfolio, thus making it a snacking leader.
As part of Campbell’s strategic plan, this buyout creates a $10-billion entity with roughly 50% of the company’s annual net sales in the faster-growing snacks unit. Notably, the addition of Snyder’s-Lance is anticipated to realize nearly $170 million as cost synergies by the end of fiscal 2022. Further, the integration is expected to generate about $125 million from Snyder’s-Lance’s current cost-transformation program.
The combined snacking portfolio is likely to offer a broad range of exclusive better-for-you snacks comprising certain recognized brands like Goldfish, Milano, Snyder’s of Hanover, Snack Factory Pretzel Crisps, Lance, Cape Cod, Kettle Brand, KETTLE chips, Emerald and Late July.
Additionally, Campbell has made a systematic way for both companies to rapidly adopt the major learnings and practices. The buyer will also unite the key control objectives together with supply chain and quality as well as finance.
With the Snyder’s-Lance consolidation, management brought to effect some leadership changes to effectively manage the newly-formed Campbell Snacks unit and also to focus on the optimization of its U.S. snacks business. Those at the company’s helm are likely to concentrate on innovation and brand building across snacks business, end-to-end manufacturing quality, value capture and acceleration of business strategy among others.
In fiscal 2017, Campbell's global baked snacks product unit, consisting of Pepperidge Farm, Arnott’s and Kelsen businesses, grossed nearly $2.5 billion as net sales. Following the accretion of Snyder’s-Lance, snacking is likely to contribute about 47% to the company’s overall net sales annually as compared to the 32%, logged earlier. Further, the company’s soup portfolio will contribute roughly 26% to net sales in a year. Snyder’s-Lance generated net sales of $2.2 billion in 2017.
Campbell has long been making acquisitions to enhance its brand portfolio and expedite business growth. Prior to the aforesaid buyout, the company acquired a leading organic broth and soup producer named Pacific Foods, in a drive to widen its foothold in the fast-growing organic food space. Some other notable acquisitions are Garden Fresh Gourmet, Bolthouse Farms, the organic baby-food firm, Plum and the biscuit firm, Kelsen.
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Stock Performance
Following the buyout news, shares of the Camden-based company did not swing much. However, this Zacks Rank #3 (Hold) stock has lost 1.4% in the past month, though narrower than the industry’s decline of 4.5%.
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