Glenboden M & A Originations

Options for Campbell Soup's new acquisition agenda

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Origination Status sale of non –core business announced in May 2008
Asset brands and trade of Campbell’s Australian salty snacks business
Buyer private local investors
Seller Campbell Soup Company (USA), world’s largest branded soup producer
Buyer Rationale attractive valuation, recognized brands
Seller Rationale focus on core categories of ready soups and simple meals
NBs Campbell subsequently announced focus on ‘acquisitions, strategic alliances and joint ventures'
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Campbell seems to be tidying up its portfolio, by divesting non –core businesses like Godiva luxury chocolates last December, and now this salty snacks business in Australia. This would classically mean that the group is setting itself up for an acquisition hunt, especially now that it’s appointed a former investment banker as its VP for corporate development. The big question is, will Campbell affirms its status as a true multinational, by going out and making a bold acquisition or two ? If so there are some obvious candidates, most notably Uncle Ben’s.

Campbell, as it currently stands, is a borderline case between a true multinational, and one of those US –focused corporates whose overseas business is mostly limited to alliances in cherry-picked geographies. On the one hand, the group has strong local brands that it acquired in Europe, notably Erasco, Germany’s largest instant soups brand, and Liebig, France’s leading aseptic soups brand. On the other hand, market entry plans in Russia and China, announced last year, are limited to expansion of the Campbell’s brand through local distribution partners (a Coca-Cola bottler in the case of China).

We predict, therefore, that Campbell will acquire a big brand now, armed with the $ 850 mln that it raised by selling Godiva to Ulker Group, but that its target will not be a foreign one. The obvious candidate with that profile is Uncle Ben’s, currently owned by Mars.

Glenboden earlier this month predicted that, in the wake of the acquisition by Mars of Wrigley, the former will need to divest its grocery business in order to buy out its co-financier in the deal, Berkshire Hathaway (see related article). The fit with Campbell seems very good. Both are iconic American grocery brands, that are known and distributed in over 100 countries around the world. The Uncle Ben’s product range, with rice, cook-in sauces and frozen products, is highly complementary to Campbell’s soups and simple meals. Financially, although margins are under pressure in these grocery categories, the synergy benefits will be a compensating factor. Watch this space.

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