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Campbell (CPB) to Sell Kelsen, Progresses With Restructuring

Zacks Equity Research

In sync with its portfolio refinement efforts, Campbell Soup Company CPB has inked a deal to sell Kelsen Group to an associated company of Ferrero for almost $300 million. Management intends to utilize the net sale proceeds to lower debt. Also, the move is likely to enable the company to 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 is undertaking prudent actions to exit non-key businesses to optimize its portfolio. In 2018, the company announced intentions to review prospects for the divestiture of the Campbell International segment, which includes the Kelsen Group business. The move looks appropriate, as it will enable the company to focus more on areas with growth potential.

The Kelsen Group divestiture deal is expected to be completed by the end of the first quarter of fiscal 2020, subject to certain customary price adjustments.  Further, management highlighted that it is on track with identifying prospects for selling the remaining parts of the Campbell International segment. These include Arnott’s biscuits, simple meals businesses in Australia, Malaysia, Hong Kong and Japan as well as manufacturing operations in Australia, Indonesia and Malaysia.

In prior developments related to portfolio restructuring, the company exited the underperforming Campbell Fresh (C-Fresh) unit. 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.

Such divestitures will allow the company to focus on businesses in the North American market — Campbell Snacks and Campbell Meals & Beverages.

Notably, initiatives to strengthen snacks brands are an essential part of Campbell’s core strategies. Evidently, the acquisition of Snyder's-Lance is helping it enhance the performance of global biscuits and 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.

Also, the company is progressing well with cost savings plans. It expects to generate cost savings of about $180 million in fiscal 2019. Gains from such plans are expected to support portfolio growth endeavors.

Clearly, Campbell seems to be striking the right chords to boost business performance. In fact, such efforts are boosting investors’ optimism. This Zacks Rank #2 (Buy) stock has gained 15.9% in the past six months compared with the industry’s rise of 7.4%.

Wrapping up, we believe that Campbell’s portfolio refinement moves will yield results in the forthcoming periods and help it strengthen footing in the food space.

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