Campbell Soup Company : Campbell to Buy Bolthouse Farms for $1.55 Billion
07/09/2012| 02:44pm US/Eastern
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--Campbell buying juice maker Bolthouse Farms for $1.55 billion
--Deal gives Campbell platform in packaged fresh-food area that is seeing better growth
--Campbell says deal will boost earnings in upcoming fiscal 2013
(Adds comment from interview with CEO in paragraphs seven, nine and 10, and data on overall grocery sales in second paragraph.)
By Paul Ziobro
Campbell Soup Co. (CPB) is placing a $1.55 billion bet that Bolthouse Farms Inc., which already provides Campbell with carrots for its soups and concentrate for its V8 juices, can also supply the soup maker with some badly needed growth by giving it a stronger foothold in refrigerated foods.
Campbell on Monday agreed to buy Bolthouse, a 97-year-old maker of high-end juices, baby carrots and salad dressings, from private-equity firm Madison Dearborn Partners LLC. The deal marks the biggest move yet by Campbell, which pioneered canning condensed soups 115 years ago, to move into the packaged fresh-food category, a $12 billion category growing at nearly 7% a year, much stronger than traditional grocery staples. Data provider Euromonitor International estimates that packaged-food sales rose just 2% in 2011.
The shift in preference to fresher foods from shelf-stable ones, especially by the key younger demographic that Campbell is trying to court, represents a key challenge for the soup maker. In addition to its namesake soup business, Campbell sells most of its products in the so-called center-store aisles of the supermarkets, loaded with preservatives so that they can last in the pantry for months, if not years.
But Campbell is acknowledging that for some consumers, freshness trumps longevity, and that trend is projected to continue. The Bolthouse acquisition helps to address the lack of fresh products in Campbell's portfolio.
"I like to think of it, instead of either-or, as the best of both worlds," Campbell President and Chief Executive Denise Morrison said Monday on a conference call with analysts.
Campbell is paying about 9.5 times Bolthouse's adjusted annual earnings before interest, taxes, depreciation and amortization for the Bakersfield, Calif.-based company.
Campbell hopes the deal creates a firm base from which to create a broader portfolio of packaged fresh-foods, including soup, which it already sells, primarily under grocers' private-label brands, but in far smaller amounts than its canned soup. In an interview Monday, Ms. Morrison said that Campbell's fresh-packaged soup business is about $100 million a year right now; its U.S. simple meals business, which includes soup, had $2.8 billion in sales in fiscal 2011.
Campbell also sees Bolthouse juices, including carrot and pomegranate varieties, providing a complement to its V8 shelf-stable vegetable juices.
Campbell has eyed Bolthouse in the past. Ms. Morrison said that she looked at the company more than three years ago, intrigued about pursuing an acquisition, but was told it wasn't for sale at the time. "I was politely told they weren't for sale," Ms. Morrison said.
She reached out to Bolthouse again soon after becoming Campbell's CEO last August, an overture that proved more fruitful since Madison Dearborn was had put Bolthouse up for sale.
The deeper foray into beverages and into the perimeter of the supermarket comes as Campbell continues to try to fix its base soup business. Soup sales have been down for several years due to a combination of shifting consumer preferences for simple meals, a lack of successful new products and ineffective discounting that failed to move products.
Campbell is trying to stabilize its soup business by halting deep discounts and investing more into advertising and new products. It's coming out with at least 30 new soup items in its next fiscal year, including soups that come in pouches and in new flavors that try to appeal to a younger demographic.
Campbell will run Bolthouse as a separate business unit to avoid being distracted from fixing its North America business.
"It is not in any way shape or form a step that will diminish our focus on our business in North America," Ms. Morrison said. Nor, she added, will it inhibit plans to grow internationally, either through acquisitions or other partnerships.
Campbell expects the deal to close in the late summer, and that it will add five cents to seven cents to its per-share earnings in its upcoming fiscal 2013. It otherwise backed its guidance for fiscal 2012, which ends July 31.
For the fiscal year ended March 31, Bolthouse reported sales of $689 million, and earnings before interest and taxes of $92 million. Bolthouse management, including President and Chief Executive Jeff Dunn, will remain with the company.
The deal represents a positive return for Madison Dearborn, which bought Bolthouse in 2005 for $1.1 billion. The Chicago-based firm put in $260 million in cash toward that deal, which Bolthouse management invested about $200 million in equity.
-Write to Paul Ziobro at paul.ziobro@dowjones.com
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