Campbell Soup to sell units, leaves open option of complete sale

New York

CAMPBELL Soup Co said on Thursday that it plans to sell its international and fresh refrigerated-foods units and left open the possibility of putting the whole company up for sale, following a months-long review and pressure from hedge fund investors to sell itself outright.

It is not clear if the plan will appease activist investor Dan Loeb, whose Third Point LLC hedge fund announced a 5.65 per cent stake on Aug 9 and immediately pressed for a sale of the entire company to a competitor as "the only justifiable outcome". Third Point did not immediately respond to a request for comment on Thursday. If dissatisfied, Mr Loeb could escalate his attack into a proxy fight and nominate a slate of directors within the next few weeks to be voted on at Campbell's annual meeting later this year, sources told Reuters this week.

Campbell's board kept alive the possibility of a complete sale, saying it "remains open and committed to evaluating all strategic options to enhance value in the future".

Alongside the results of its review, Campbell also forecast earnings per share for fiscal 2019 below Wall Street's average estimate.

The 149-year-old company, which revolutionised the home-cooking industry with easy-to-prepare soups and low-cost production techniques, has been struggling to attract young consumers to its namesake soups and Pepperidge Farm cookies. Meanwhile, its latest foray into fresh food has faltered while its debt and costs have increased.

Campbell said it would use the proceeds of the unit sales to reduce its debt and increased its cost savings target by US$150 million to US$945 million by the end of fiscal 2022.

Retreating from the smaller international and fresh-food businesses marks a change from the strategy of former CEO Denise Morrison, who wanted Campbell to have a diverse portfolio with a focus on health and well-being.

Mr Morrison stepped down abruptly in May after a string of poor results. On the same day, the company announced a sweeping review of its portfolio and board member Keith McLoughlin was named interim CEO.

The proposed unit sales may make Campbell a more attractive takeover target as it turns its focus back to its core soup and salty snacks businesses, the pillars of the company.

The two businesses put up for sale currently bring in about US$2.1 billion in annual sales, about a quarter of Campbell's overall revenue.

Campbell International includes Australian biscuits brand 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.

The company has hired Goldman Sachs Group Inc and Centerview Partners to sell the units.

For fiscal 2019, Campbell forecast earnings per share of between US$2.45 and US$2.53 for fiscal 2019, not including the effect of the planned unit sales, below Wall Street's average estimate of US$2.69, according to Thomson Reuters I/B/E/S. REUTERS