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Campbell to Exit C-Fresh Business With Bolthouse Farms' Sale

Zacks Equity Research

Campbell Soup Company CPB inked a deal to divest the Bolthouse Farms business to Butterfly Equity’s affiliate for $510 million. Butterfly Equity is a private equity company, which specializes in the food space. The deal is expected to conclude by the end of fiscal 2019, on certain conditions.

With this, Campbell will completely do away with its Campbell Fresh division. This, in turn, forms part of the company’s portfolio review and Board-led strategy. Markedly, as part of the strategy, the company had earlier unveiled intentions to divest non-key businesses — Campbell International (which includes Arnott’s and the Kelsen Group) and Campbell Fresh (C-Fresh) — to sharpen focus and enhance portfolio.

In fact, the company recently unveiled plans to divest the Garden-Fresh Gourmet business, prior to which it also revealed plans to sell the Everett refrigerated soup plant. These businesses are part of the Campbell Fresh unit, whose sale proceeds will help management curtail debt load by nearly $570 million. However, the deal is not likely to have any impact on Campbell’s outlook for fiscal 2019.

We also note that management plans to bring focus on two separate businesses in the company’s key North American market — Campbell Snacks, and Campbell Meals and Beverages. Apart from this, Campbell Soup is on track with initiatives such as stabilizing the core business, integrating acquired businesses, enhancing cost savings and strengthening portfolio.

Well, the company has been struggling with its C-Fresh segment for a while now. During the second quarter of fiscal 2019, sales in the segment slipped 7% to $239 million on account of softness in refrigerated soup, Garden Fresh Gourmet and Bolthouse Farms refrigerated beverages. In the first quarter, sales in the unit slipped 1%. Clearly, the sale of this unit looks like a deemed fit, as it will allow the company to focus more on areas with higher growth potential.

That said, strengthening the presence of its growing snacks brands is part of Campbell’s core strategies. The company intends to shift focus to the fast-growing snacking category, which is expected to form about half of the company’s proforma sales in future. To this end, the company acquired Snyder's-Lance in the third quarter of fiscal 2018, which is helping it enhance the performance of its global biscuits and snacks portfolio. Going ahead, management expects brands under the snacking category to continue boosting performance, backed by enhanced marketing and innovation.



Such solid growth efforts are likely to continue fueling investors’ optimism in this Zacks Rank #3 (Hold) stock that has gained almost 14% in the past three months compared with the industry’s growth of 4.7%.

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Lamb Weston LW, with long-term earnings per share growth rate of 12.4%, carries a Zacks Rank #2.

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