Campbell scoops up Bolthouse

Cans of Cream of Chicken Campbell's Condensed Soup is seen stocked on a shelf at a grocery store in...

Cans of Cream of Chicken Campbell's Condensed Soup is seen stocked on a shelf at a grocery store in Phoenix, Arizona, in this file picture taken February 22, 2010.(Reuters/JOSHUA LOTT/Files)


, Last Updated: 4:45 PM ET

Campbell Soup Co plans to buy Bolthouse Farms for $1.55 billion in cash, adding refrigerated juices and baby carrots to its portfolio of canned soups and V8 vegetable drinks.

The deal is the latest example of packaged food and beverage companies expanding into healthier products. PepsiCo Inc said Monday it will start selling yogurt in the United States this summer through a joint venture.

Campbell shares were down 1 percent on Monday, underperforming the larger stock market, as some investors saw the price tag as too high given limited scope for cost-savings.

“Though we think Bolthouse is a solid brand, we believe Campbell paid a steep price for the business,” said JP Morgan analyst Ken Goldman. Goldman said cost savings opportunities will be minimal as no factories are slated to close.

Campbell said on Monday that it was paying a multiple of 9.5 times adjusted operating earnings for Bolthouse, which will allow it to expand into the market for packaged fresh foods.

It said that market is now worth $12 billion to $13 billion and is growing 6 to 7 percent a year, or faster than packaged food overall, driven by increasing consumer demand for fresh and healthier foods.

Campbell’s current portfolio is mostly shelf-stable products like Campbell Soup and Pepperidge Farm cookies. Those products are located in the center of supermarkets, which get much less foot traffic than the perimeter, where the produce, dairy, meat and refrigerated sections are. Bolthouse’s products are typically sold in the refrigerated sections.

Bolthouse derives just over half of its annual sales of nearly $690 million from baby carrots, a product it pioneered. About a third comes from its refrigerated juices, with the remainder coming from salad dressings and other things.

Campbell, working to turn around weak performance in its soup business, said there were opportunities to launch products in adjacent categories like soups or dips.


Campbell expects the acquisition to add 5 cents to 7 cents per share to adjusted earnings in fiscal 2013.

For fiscal 2012, which will end this summer, the company expects sales to be near the low end of its forecast range of flat to up 2 percent. It sees earnings per share declining near the upper end of a forecast drop of 5 percent to 7 percent.

Campbell plans to run Bolthouse as a separate business unit. Bolthouse President and Chief Executive Jeff Dunn, a veteran of Coca-Cola Co, will remain with the company.

Campbell Chief Executive Denise Morrison said the Bolthouse acquisition will not “in any way, shape or form preempt or delay” the company’s pursuit of other acquisitions in other markets.

“This is an area in which we have done extensive work in the past year, and we are continuing our vigorous pursuit of attractive acquisitions and partnerships in International,” Morrison said, referring to the company’s continuing interest in acquisitions outside its U.S. domestic market.

Campbell acquired bread maker Ecce Panis in 2009 for an undisclosed sum.

The bidding process for Bolthouse was very competitive, with Campbell only winning at the end, said sources familiar with the situation. Over the course of the process, rival bidders included private equity firms Blackstone and Ares, private equity-backed organic food company Earthbound Farm, and an Asian food company, according to a different source.

Campbell Chief Executive Denise Morrison said Bolthouse came onto Campbell’s radar screen about three years ago, but the company was not for sale then.

Private equity firm Madison Dearborn acquired 72 percent of Bolthouse and injected $260 million in equity in the company in 2005, according to a Moody’s Investors Service credit note, which pegged that transaction’s total cost at $1.1 billion.

Madison’s stake in Bolthouse remained constant since then and the buyout firm did not get any dividends from Bolthouse during its ownership, a source familiar with the matter said. The deal announced on Monday leaves Bolthouse with $630 million in total net debt, the source added.

This represents a $662.4 million final equity value for Madison and a return of 2.55 times. Over the same period, the Standard & Poor’s 1500 Packaged Foods index rose 45 percent.

Madison Dearborn declined to comment.

Campbell was advised by Morgan Stanley. Bolthouse was advised by Credit Suisse.

Campbell shares were down 35 cents, or 1 percent, at $32.64 on the New York Stock Exchange.